0001070154us-gaap:~~CommercialRealEstateMemberus-gaap:CollateralPledgedMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-31~~FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel1Member2020-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2020~~

2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-35385

______________________________

STERLING BANCORP

(Exact Name of Registrant as Specified in its Charter)

~~______________________________~~

Delaware

80-0091851

(State or Other Jurisdiction of

(IRS Employer ID No.)

Incorporation or Organization)

Two Blue Hill Plaza, 2nd Floor

~~400 Rella Boulevard,~~

~~Montebello,~~Pearl River,

New York

~~10901~~10965

(Address of Principal Executive Office)

(Zip Code)

(845) 369-8040

(Registrant’s Telephone Number including area code)

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

STL

New York Stock Exchange

Depositary Shares, each representing 1/40 interest in a share of 6.50% Non-Cumulative Perpetual Preferred Stock, Series A

STLPRA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Classes of Common Stock						Shares outstanding as of July ~~29 2020~~28, 2021
$0.01 per share						~~194,478,227~~192,694,991

STERLING BANCORP AND SUBSIDIARIES

FORM 10-Q TABLE OF CONTENTS

QUARTERLY PERIOD ENDED JUNE 30, ~~2020~~2021


	PART I. FINANCIAL INFORMATION - UNAUDITED
Item 1.	Consolidated Balance Sheets as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020	3
	Consolidated Income Statements for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020	6
	Consolidated Statements of Cash Flows for the ~~three and~~ six months ended June 30, ~~2020~~2021 and ~~2019~~2020	8
	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5139

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7866

Item 4.	Controls and Procedures	7967

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	8068

Item 1A.	Risk Factors	8068

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8170

Item 3.	Defaults Upon Senior Securities	8170

Item 4.	Mine Safety Disclosures	8170

Item 5.	Other Information	8170

Item 6.	Exhibits	8271

	Signatures	8372

Table of Contents

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

STERLING BANCORP AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, except share and per share data)


		June 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
ASSETS:	ASSETS:					ASSETS:
Cash and due from banks	Cash and due from banks	$	324,729	$	329,151	Cash and due from banks	$	487,409	$	305,002

Securities available for sale, at estimated fair value	Securities available for sale, at estimated fair value	2,620,624		3,095,648		Securities available for sale, at estimated fair value	2,671,000		2,298,618
Securities held to maturity (“HTM”), (net of allowance for credit losses of $2,499 at June 30, 2020)		1,924,955		1,979,661
Securities held to maturity (“HTM”), net of allowance for credit losses (“ACL”) of $749 at June 30, 2021 and $1,499 at December 31, 2020						Securities held to maturity (“HTM”), net of allowance for credit losses (“ACL”) of $749 at June 30, 2021 and $1,499 at December 31, 2020	1,695,470		1,740,838
Loans held for sale	Loans held for sale	44,437		8,125		Loans held for sale	19,088		11,749
Portfolio loans	Portfolio loans	22,295,267		21,440,212		Portfolio loans	20,724,097		21,848,409
Allowance for credit losses - loans		(365,489)		(106,238)
ACL - loans						ACL - loans	(314,873)		(326,100)
Portfolio loans, net	Portfolio loans, net	21,929,778		21,333,974		Portfolio loans, net	20,409,224		21,522,309
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	193,666		251,805		Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock, at cost	151,443		166,190
Accrued interest receivable	Accrued interest receivable	101,296		100,312		Accrued interest receivable	96,728		97,505
Premises and equipment, net	Premises and equipment, net	226,728		227,070		Premises and equipment, net	204,632		202,555
Goodwill	Goodwill	1,683,482		1,683,482		Goodwill	1,683,482		1,683,482
Other intangible assets, net	Other intangible assets, net	101,964		110,364		Other intangible assets, net	86,012		93,564
Bank owned life insurance (“BOLI”)	Bank owned life insurance (“BOLI”)	620,908		613,848		Bank owned life insurance (“BOLI”)	635,411		629,576
Other real estate owned	Other real estate owned	8,665		12,189		Other real estate owned	816		5,347
Other assets	Other assets	1,058,661		840,868		Other assets	1,003,203		1,063,403
Total assets	Total assets	$	30,839,893	$	30,586,497	Total assets	$	29,143,918	$	29,820,138
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:	LIABILITIES:					LIABILITIES:
Deposits	Deposits	$	23,600,621	$	22,418,658	Deposits	$	23,146,711	$	23,119,522
FHLB and other borrowings	FHLB and other borrowings	975,058		2,245,653		FHLB and other borrowings	0		382,000
Paycheck Protection Program Lending Facility		568,350		—
Federal funds purchased						Federal funds purchased	0		277,000

Repurchase agreements	Repurchase agreements	26,448		22,678		Repurchase agreements	25,802		27,101
Senior Notes		—		173,504

Subordinated Notes - Bank	Subordinated Notes - Bank	173,307		173,182		Subordinated Notes - Bank	0		143,703
Subordinated Notes - Company	Subordinated Notes - Company	271,096		270,941		Subordinated Notes - Company	492,219		491,910
Mortgage escrow funds	Mortgage escrow funds	69,686		58,316		Mortgage escrow funds	66,521		59,686
Other liabilities	Other liabilities	671,140		693,452		Other liabilities	689,809		728,702
Total liabilities	Total liabilities	26,355,706		26,056,384		Total liabilities	24,421,062		25,229,624
Commitments and Contingent liabilities (See Note 15. “Commitments and Contingencies”)
Commitments and Contingent liabilities (See Note 14. “Commitments and Contingencies”)						Commitments and Contingent liabilities (See Note 14. “Commitments and Contingencies”)	0		0
STOCKHOLDERS’ EQUITY:	STOCKHOLDERS’ EQUITY:					STOCKHOLDERS’ EQUITY:

Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at June 30, 2020 and December 31, 2019)		137,142		137,581
Common stock (par value $0.01 per share; 310,000,000 shares authorized at June 30, 2020 and December 31, 2019; 229,872,925 shares issued at June 30, 2020 and December 31, 2019; 194,458,805 and 198,455,324 shares outstanding at June 30, 2020 and December 31, 2019, respectively)		2,299		2,299
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at June 30, 2021 and December 31, 2020)						Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; 135,000 shares issued and outstanding at June 30, 2021 and December 31, 2020)	136,224		136,689
Common stock (par value $0.01 per share; 310,000,000 shares authorized at June 30, 2021 and December 31, 2020; 229,872,925 shares issued at June 30, 2021 and December 31, 2020; 192,715,433 and 192,923,371 shares outstanding at June 30, 2021 and December 31, 2020, respectively)						Common stock (par value $0.01 per share; 310,000,000 shares authorized at June 30, 2021 and December 31, 2020; 229,872,925 shares issued at June 30, 2021 and December 31, 2020; 192,715,433 and 192,923,371 shares outstanding at June 30, 2021 and December 31, 2020, respectively)	2,299		2,299
Additional paid-in capital	Additional paid-in capital	3,755,474		3,766,716		Additional paid-in capital	3,753,068		3,761,993
Treasury stock, at cost (35,414,120 shares at June 30, 2020 and 31,417,601 shares at December 31, 2019)		(660,223)		(583,408)
Treasury stock, at cost (37,157,492 shares at June 30, 2021 and 36,949,554 shares at December 31, 2020)						Treasury stock, at cost (37,157,492 shares at June 30, 2021 and 36,949,554 shares at December 31, 2020)	(696,711)		(686,911)
Retained earnings	Retained earnings	1,160,885		1,166,709		Retained earnings	1,459,077		1,291,628
Accumulated other comprehensive income, net of tax expense of $33,847 at June 30, 2020 and $15,361 at December 31, 2019		88,610		40,216
Accumulated other comprehensive income, net of tax expense of $26,317 at June 30, 2021 and $32,399 at December 31, 2020						Accumulated other comprehensive income, net of tax expense of $26,317 at June 30, 2021 and $32,399 at December 31, 2020	68,899		84,816
Total stockholders’ equity	Total stockholders’ equity	4,484,187		4,530,113		Total stockholders’ equity	4,722,856		4,590,514
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	30,839,893	$	30,586,497	Total liabilities and stockholders’ equity	$	29,143,918	$	29,820,138

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Income Statements (Unaudited)

(Dollars in thousands, except share and per share data)


		Three months ended						Six months ended							Three months ended				Six months ended
		June 30,						June 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Interest and dividend income:	Interest and dividend income:									Interest and dividend income:
Loans and loan fees	Loans and loan fees	$	219,904	$	258,283	$	455,343	$	518,578	Loans and loan fees	$	201,685	$	219,904	$	407,540	$	455,343
Securities taxable	Securities taxable	18,855		24,632		39,484		52,479		Securities taxable	15,749		18,855		31,101		39,484
Securities non-taxable	Securities non-taxable	12,831		14,423		25,828		29,280		Securities non-taxable	11,718		12,831		23,456		25,828
Other earning assets	Other earning assets	1,636		5,119		6,098		11,520		Other earning assets	1,158		1,636		2,060		6,098
Total interest and dividend income	Total interest and dividend income	253,226		302,457		526,753		611,857		Total interest and dividend income	230,310		253,226		464,157		526,753
Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	28,110		48,129		73,891		94,124		Deposits	6,698		28,110		15,566		73,891
Borrowings	Borrowings	11,817		22,489		27,791		50,388		Borrowings	5,085		11,817		12,150		27,791
Total interest expense	Total interest expense	39,927		70,618		101,682		144,512		Total interest expense	11,783		39,927		27,716		101,682
Net interest income	Net interest income	213,299		231,839		425,071		467,345		Net interest income	218,527		213,299		436,441		425,071
Provision for credit losses - loans	Provision for credit losses - loans	56,606		11,500		193,183		21,700		Provision for credit losses - loans	6,000		56,606		16,000		193,183
Provision for credit losses - held to maturity securities	Provision for credit losses - held to maturity securities	—		—		1,703		—		Provision for credit losses - held to maturity securities	(750)		0		(750)		1,703
Net interest income after provision for credit losses	Net interest income after provision for credit losses	156,693		220,339		230,185		445,645		Net interest income after provision for credit losses	213,277		156,693		421,191		230,185
Non-interest income:	Non-interest income:									Non-interest income:
Deposit fees and service charges	Deposit fees and service charges	5,345		7,098		11,968		13,310		Deposit fees and service charges	7,096		5,345		13,659		11,968
Accounts receivable management / factoring commissions and other fees		4,419		5,794		9,956		11,217
Accounts receivable management / factoring commissions and fees										Accounts receivable management / factoring commissions and fees	5,491		4,419		10,917		9,956
Bank owned life insurance	Bank owned life insurance	4,950		4,192		9,967		7,833		Bank owned life insurance	4,981		4,950		9,936		9,967
Loan commissions and fees	Loan commissions and fees	8,003		5,308		19,028		9,146		Loan commissions and fees	8,762		8,003		19,239		19,028
Investment management fees	Investment management fees	1,379		2,050		3,225		3,950		Investment management fees	2,018		1,379		3,870		3,225

Net gain (loss) on sale of securities		485		(528)		8,896		(13,712)
Net gain on called securities		—		—		4,880		—
Net gain on sale of securities										Net gain on sale of securities	0		485		706		8,896
Net (loss) gain on called securities										Net (loss) gain on called securities	(80)		0		(67)		4,880

Gain on sale of residential mortgage loans		—		—		—		8,313

Other	Other	1,509		3,144		5,496		6,598		Other	1,946		1,509		4,310		5,496
Total non-interest income	Total non-interest income	26,090		27,058		73,416		46,655		Total non-interest income	30,214		26,090		62,570		73,416
Non-interest expense:	Non-interest expense:									Non-interest expense:
Compensation and benefits	Compensation and benefits	54,668		54,473		109,544		110,463		Compensation and benefits	56,953		54,668		115,040		109,544
Stock-based compensation plans	Stock-based compensation plans	5,913		4,605		11,919		9,728		Stock-based compensation plans	6,781		5,913		13,398		11,919
Occupancy and office operations	Occupancy and office operations	14,695		16,106		29,894		32,641		Occupancy and office operations	13,875		14,695		28,390		29,894
Information technology	Information technology	7,312		9,047		15,330		17,722		Information technology	9,741		7,312		18,987		15,330
Professional fees										Professional fees	7,561		5,458		14,638		11,207
Amortization of intangible assets	Amortization of intangible assets	4,200		4,785		8,400		9,611		Amortization of intangible assets	3,776		4,200		7,552		8,400
FDIC insurance and regulatory assessments	FDIC insurance and regulatory assessments	3,638		2,994		6,844		6,332		FDIC insurance and regulatory assessments	2,344		3,638		5,574		6,844
Other real estate owned expense, net	Other real estate owned expense, net	1,233		458		1,285		675		Other real estate owned expense, net	(72)		1,233		(140)		1,285
Merger-related expense										Merger-related expense	2,481		0		2,481		0

Charge for asset write-downs, retention and severance		—		—		—		3,344

Impairment related to financial centers and real estate consolidation strategy	Impairment related to financial centers and real estate consolidation strategy	—		14,398		—		14,398		Impairment related to financial centers and real estate consolidation strategy	475		0		1,108		0

Loss on extinguishment of borrowings										Loss on extinguishment of borrowings	1,243		9,723		1,243		10,476
Other	Other	33,222		20,074		56,378		37,018		Other	15,471		18,041		30,523		34,695
Total non-interest expense	Total non-interest expense	124,881		126,940		239,594		241,932		Total non-interest expense	120,629		124,881		238,794		239,594
Income before income tax expense	Income before income tax expense	57,902		120,457		64,007		250,368		Income before income tax expense	122,862		57,902		244,967		64,007
Income tax expense (benefit)	Income tax expense (benefit)	7,110		23,997		(932)		52,471		Income tax expense (benefit)	24,523		7,110		47,478		(932)
Net income	Net income	50,792		96,460		64,939		197,897		Net income	98,339		50,792		197,489		64,939
Preferred stock dividend	Preferred stock dividend	1,972		1,987		3,948		3,976		Preferred stock dividend	1,959		1,972		3,922		3,948
Net income available to common stockholders	Net income available to common stockholders	$	48,820	$	94,473	$	60,991	$	193,921	Net income available to common stockholders	$	96,380	$	48,820	$	193,567	$	60,991
Weighted average common shares:	Weighted average common shares:									Weighted average common shares:
Basic	Basic	193,479,757		206,932,114		194,909,498		210,022,967		Basic	191,436,885		193,479,757		191,655,897		194,909,498
Diluted	Diluted	193,604,431		207,376,239		195,168,557		210,419,425		Diluted	192,292,989		193,604,431		192,456,817		195,168,557
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	0.25	$	0.46	$	0.31	$	0.92	Basic	$	0.50	$	0.25	$	1.01	$	0.31
Diluted	Diluted	0.25		0.46		0.31		0.92		Diluted	0.50		0.25		1.01		0.31

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)

Three months ended Six months ended
June 30, June 30,
2020 2019 2020 2019
Net income $ 50,792 $ 96,460 $ 64,939 $ 197,897
Other comprehensive income, before tax:
Change in unrealized holding gains on securities available for sale 29,356 64,176 78,111 139,506
Unrealized (loss) on transfer of securities held to maturity to available for sale — — — (11,813)
Reclassification adjustment for net realized (gains) losses included in net income (485) 528 (8,896) 13,712
Accretion of net unrealized loss on securities transferred to held to maturity 59 122 156 2,539
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans 76 66 (2,492) 2,949
Total other comprehensive income, before tax 29,006 64,892 66,879 146,893
Deferred tax (expense) related to other comprehensive income (8,017) (17,936) (18,485) (40,602)
Other comprehensive income, net of tax 20,989 46,956 48,394 106,291
Comprehensive income $ 71,781 $ 143,416 $ 113,333 $ 304,188


	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income	$	98,339	$	50,792	$	197,489	$	64,939
Other comprehensive income, before tax:
Change in unrealized holding gains (losses) on securities available for sale	15,082		29,356		(18,857)		78,111

Reclassification adjustment for net realized losses (gains) included in net income	0		(485)		(706)		(8,896)
Accretion of net unrealized loss on securities transferred to held to maturity	40		59		85		156
Change in the actuarial loss of defined benefit plan and post-retirement benefit plans	504		76		(2,521)		(2,492)
Total other comprehensive income (loss), before tax	15,626		29,006		(21,999)		66,879
Deferred tax (expense) benefit related to other comprehensive income	(4,318)		(8,017)		6,082		(18,485)
Other comprehensive income (loss), net of tax	11,308		20,989		(15,917)		48,394
Comprehensive income	$	109,647	$	71,781	$	181,572	$	113,333

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(Dollars in thousands, except share and per share data)

Number of common
shares Preferred stock Common
stock Additional
paid-in
capital Treasury
stock Retained
earnings Accumulated
other
comprehensive
(loss) income Total
stockholders’
equity
Balance at January 1, 2019 216,227,852 $ 138,423 $ 2,299 $ 3,776,461 $ (213,935) $ 791,550 $ (65,945) $ 4,428,853
Net income — — — — — 101,437 — 101,437
Other comprehensive income — — — — — — 59,335 59,335
Stock options & other stock transactions, net 3,893 — — — 49 6 — 55
Restricted stock awards, net 1,331,674 — — (24,626) 12,818 12,913 — 1,105
Cash dividends declared ($0.07 per common share) — — — — — (15,079) — (15,079)
Cash dividends declared ($16.25 per preferred share) — (205) — — — (1,989) — (2,194)
Purchase of treasury stock (8,002,595) — — — (154,289) — — (154,289)
Balance at March 31, 2019 209,560,824 138,218 2,299 3,751,835 (355,357) 888,838 (6,610) 4,419,223
Net income — — — — — 96,460 — 96,460
Other comprehensive income — — — — — — 46,956 46,956
Stock options & other stock transactions, net 168,169 — — — 1,410 424 — 1,834
Restricted stock awards, net (39,697) — — 5,291 (887) — — 4,404
Cash dividends declared ($0.07 per common share) — — — — — (14,611) — (14,611)
Cash dividends declared ($16.25 per preferred share) — (207) — — — (1,987) — (2,194)
Purchase of treasury stock (4,502,053) — — — (92,914) — — (92,914)
Balance at June 30, 2019 205,187,243 $ 138,011 $ 2,299 3,757,126 $ (447,748) $ 969,124 $ 40,346 $ 4,459,158


	Number of common shares	Preferred stock		Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
Balance at January 1, 2020	198,455,324	$	137,581	$	2,299	$	3,766,716	$	(583,408)	$	1,166,709	$	40,216	$	4,530,113
Cumulative effect of change in accounting principle (adoption of Current Expected Credit Loss standard (“CECL”))	—	—		—		—		—		(54,254)		—		(54,254)
Balance at January 1, 2020 (as adjusted for change in accounting principle)	198,455,324	137,581		2,299		3,766,716		(583,408)		1,112,455		40,216		4,475,859
Net income	—	—		—		—		—		14,147		—		14,147
Other comprehensive income	—	—		—		—		—		—		27,405		27,405

Stock options & other stock transactions, net	41,000	—		—		—		346		68		—		414

Common shares acquired from stock compensation plan activity	(316,582)	—		—		(24,516)		5,916		14,187		—		(4,413)
Stock-based compensation	1,181,673	—		—		7,308		(1,891)		589		—		6,006

Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,768)		—		(13,768)
Cash dividends declared ($16.25 per preferred share)	—	(218)		—		—		—		(1,976)		—		(2,194)
Purchase of treasury stock	(4,900,759)	—		—		—		(81,032)		—		—		(81,032)

Balance at March 31, 2020	194,460,656	137,363		2,299		3,749,508		(660,069)		1,125,702		67,621		4,422,424
Net income	—	—		—		—		—		50,792		—		50,792
Other comprehensive income	—	—		—		—		—		—		20,989		20,989

Stock options & other stock transactions, net	10,000	—		—		—		95		6		—		101
Common shares acquired from stock compensation plan activity	(14,467)	—		—		(180)		(16)		5		—		(191)
Stock-based compensation	2,616	—		—		6,146		(233)		—		—		5,913

Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,648)		—		(13,648)
Cash dividends declared ($16.25 per preferred share)	—	(221)		—		—		—		(1,972)		—		(2,193)


Balance at June 30, 2020	194,458,805	$	137,142	$	2,299	$	3,755,474	$	(660,223)	$	1,160,885	$	88,610	$	4,484,187

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(Dollars in thousands, except share and per share data)


		Number of common shares	Preferred stock		Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity			Number of common shares	Preferred stock		Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Total stockholders’ equity
Balance at January 1, 2020		198,455,324	$	137,581	$	2,299	$	3,766,716	$	(583,408)	$	1,166,709	$	40,216	$	4,530,113
Cumulative effect of change in accounting principle (see Note 1. “Basis of Financial Statement Presentation”)		—	—		—		—		—		(54,254)		—		(54,254)
Balance at January 1, 2020 (as adjusted for change in accounting principle)		198,455,324	137,581		2,299		3,766,716		(583,408)		1,112,455		40,216		4,475,859
Balance at January 1, 2021																	Balance at January 1, 2021	192,923,371	$	136,689	$	2,299	$	3,761,993	$	(686,911)	$	1,291,628	$	84,816	$	4,590,514

Net income	Net income	—	—		—		—		—		14,147		—		14,147		Net income	—	—		—		—		—		99,150		—		99,150
Other comprehensive income		—	—		—		—		—		—		27,405		27,405
Other comprehensive loss																	Other comprehensive loss	—	—		—		—		—		—		(27,225)		(27,225)
Stock options & other stock transactions, net	Stock options & other stock transactions, net	41,000	—		—		—		346		68		—		414		Stock options & other stock transactions, net	73,946	—		—		—		1,376		(624)		—		752
Restricted stock awards, net		865,091	—		—		(17,208)		4,025		14,776		—		1,593
Common shares acquired from stock compensation plan activity																	Common shares acquired from stock compensation plan activity	(332,290)	—		—		(23,241)		13,860		2,746		—		(6,635)
Stock-based compensation																	Stock-based compensation	1,138,246	—		—		7,138		(415)		(106)		—		6,617

Cash dividends declared ($0.07 per common share)	Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,768)		—		(13,768)		Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,490)		—		(13,490)
Cash dividends declared ($16.25 per preferred share)	Cash dividends declared ($16.25 per preferred share)	—	(218)		—		—		—		(1,976)		—		(2,194)		Cash dividends declared ($16.25 per preferred share)	—	(231)		—		—		—		(1,963)		—		(2,194)
Purchase of treasury stock	Purchase of treasury stock	(4,900,759)	—		—		—		(81,032)		—		—		(81,032)		Purchase of treasury stock	(1,235,372)	—		—		—		(27,325)		—		—		(27,325)
Balance at March 31, 2020		194,460,656	137,363		2,299		3,749,508		(660,069)		1,125,702		67,621		4,422,424
Balance at March 31, 2021																	Balance at March 31, 2021	192,567,901	136,458		2,299		3,745,890		(699,415)		1,377,341		57,591		4,620,164
Net income	Net income	—	—		—		—		—		50,792		—		50,792		Net income	—	—		—		—		—		98,339		—		98,339
Other comprehensive income	Other comprehensive income	—	—		—		—		—		—		20,989		20,989		Other comprehensive income	—	—		—		—		—		—		11,308		11,308
Stock options & other stock transactions, net	Stock options & other stock transactions, net	10,000	—		—		—		95		6		—		101		Stock options & other stock transactions, net	166,459	—		—		—		3,072		(1,243)		—		1,829
Restricted stock awards, net		(11,851)	—		—		5,966		(249)		5		—		5,722
Common shares acquired from stock compensation plan activity																	Common shares acquired from stock compensation plan activity	(18,927)	—		—		70		(43)		(1)		—		26
Stock-based compensation																	Stock-based compensation	—	—		—		7,108		(325)		(2)		—		6,781

Cash dividends declared ($0.07 per common share)	Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,648)		—		(13,648)		Cash dividends declared ($0.07 per common share)	—	—		—		—		—		(13,398)		—		(13,398)
Cash dividends declared ($16.25 per preferred share)	Cash dividends declared ($16.25 per preferred share)	—	(221)		—		—		—		(1,972)		—		(2,193)		Cash dividends declared ($16.25 per preferred share)	—	(234)		—		—		—		(1,959)		—		(2,193)

Balance at June 30, 2020		194,458,805	$	137,142	$	2,299	$	3,755,474	$	(660,223)	$	1,160,885	$	88,610	$	4,484,187
Balance at June 30, 2021																	Balance at June 30, 2021	192,715,433	$	136,224	$	2,299	$	3,753,068	$	(696,711)	$	1,459,077	$	68,899	$	4,722,856

See accompanying notes to consolidated financial statements.

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


		Six months ended							Six months ended
		June 30,							June 30,
		2020		2019			2021		2020

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	64,939	$	197,897	Net income	$	197,489	$	64,939
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for credit losses - loans	Provisions for credit losses - loans	193,183		21,700		Provisions for credit losses - loans	16,000		193,183
Provision for credit losses - held to maturity securities		1,703		—
Net loss (gain) from write-downs and sales of other real estate owned		1,019		(192)
Net (gain) on extinguishment of Senior Notes		—		(46)
(Credit) provision for credit losses - held to maturity securities						(Credit) provision for credit losses - held to maturity securities	(750)		1,703
Net (gain) loss from write-downs and sales of other real estate owned						Net (gain) loss from write-downs and sales of other real estate owned	(219)		1,019
Net loss on extinguishment of subordinated notes - Bank						Net loss on extinguishment of subordinated notes - Bank	1,243		0
Depreciation of premises and equipment	Depreciation of premises and equipment	9,941		9,723		Depreciation of premises and equipment	9,025		9,941
Loss on extinguishment of FHLB borrowings	Loss on extinguishment of FHLB borrowings	10,476		—		Loss on extinguishment of FHLB borrowings	0		10,476
Impairment on fixed assets	Impairment on fixed assets	—		10,473		Impairment on fixed assets	197		0
Impairment of early termination of leases	Impairment of early termination of leases	—		3,925		Impairment of early termination of leases	127		0
Asset write-downs, retention and severance compensation and other restructuring charges		—		3,344

Amortization of intangible assets	Amortization of intangible assets	8,400		9,611		Amortization of intangible assets	7,552		8,400
Gain on sale of premises and equipment						Gain on sale of premises and equipment	(309)		0
Amortization of low income housing tax credits	Amortization of low income housing tax credits	16,388		7,883		Amortization of low income housing tax credits	23,333		16,388
Net (gain) loss on sale of securities		(8,896)		13,712
(Gain) on security calls available for sale		(4,897)		—
Net gain on sale of securities						Net gain on sale of securities	(706)		(8,896)
Loss (gain) on security calls available for sale						Loss (gain) on security calls available for sale	62		(4,897)
Loss on security calls held to maturity	Loss on security calls held to maturity	17		—		Loss on security calls held to maturity	5		17
Net (gain) on loans held for sale		(2,881)		(8,313)
Net gain on loans held for sale						Net gain on loans held for sale	0		(2,881)

Net amortization of premiums on securities	Net amortization of premiums on securities	15,801		18,194		Net amortization of premiums on securities	15,592		15,801
Amortization of premium on certificates of deposit	Amortization of premium on certificates of deposit	(1,229)		(2,061)		Amortization of premium on certificates of deposit	(508)		(1,229)
Net accretion of purchase discount and amortization of net deferred loan costs	Net accretion of purchase discount and amortization of net deferred loan costs	(20,172)		(48,725)		Net accretion of purchase discount and amortization of net deferred loan costs	(15,484)		(20,172)
Net accretion of debt issuance costs and amortization of premium on borrowings	Net accretion of debt issuance costs and amortization of premium on borrowings	(446)		(805)		Net accretion of debt issuance costs and amortization of premium on borrowings	363		(446)

Restricted stock compensation expense	Restricted stock compensation expense	11,919		9,728		Restricted stock compensation expense	13,398		11,919

Originations of loans held for sale	Originations of loans held for sale	(36,313)		(4,500)		Originations of loans held for sale	0		(36,313)
Proceeds from sales of loans held for sale		—		6,091

Increase in cash surrender value of bank owned life insurance	Increase in cash surrender value of bank owned life insurance	(9,967)		(7,833)		Increase in cash surrender value of bank owned life insurance	(9,936)		(9,967)
Deferred income tax (benefit) expense		(56,339)		21,634
Deferred income tax benefit						Deferred income tax benefit	(6,838)		(56,339)
Other adjustments (principally net changes in other assets and other liabilities)	Other adjustments (principally net changes in other assets and other liabilities)	(159,410)		(48,238)		Other adjustments (principally net changes in other assets and other liabilities)	32,426		(154,806)
Net cash provided by operating activities	Net cash provided by operating activities	33,236		213,202		Net cash provided by operating activities	282,062		37,840
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of securities:	Purchases of securities:					Purchases of securities:
Available for sale	Available for sale	(285,798)		(59,148)		Available for sale	(689,486)		(285,798)
Held to maturity	Held to maturity	(1,355)		(4,032)		Held to maturity	(779)		(1,355)
Proceeds from maturities and other principal payments on securities:	Proceeds from maturities and other principal payments on securities:					Proceeds from maturities and other principal payments on securities:
Available for sale	Available for sale	241,438		178,821		Available for sale	254,483		241,438
Held to maturity	Held to maturity	40,364		63,423		Held to maturity	34,291		40,364
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	459,994		738,751		Proceeds from sales of securities available for sale	20,706		459,994

Proceeds from calls of securities available for sale	Proceeds from calls of securities available for sale	138,872		—		Proceeds from calls of securities available for sale	19,080		138,872
Proceeds from calls of securities held to maturity	Proceeds from calls of securities held to maturity	905		—		Proceeds from calls of securities held to maturity	925		905
Portfolio loan originations, net		(932,814)		(518,656)
Portfolio loan repayments (originations), net						Portfolio loan repayments (originations), net	876,850		(932,814)

Proceeds from sale of commercial loans	Proceeds from sale of commercial loans	98,412		—		Proceeds from sale of commercial loans	228,380		98,412
Proceeds from sale of residential mortgage loans		—		1,409,334

Redemptions of FHLB and FRB stock, net						Redemptions of FHLB and FRB stock, net	14,747		58,139
Proceeds from sales of other real estate owned						Proceeds from sales of other real estate owned	4,750		3,237
Purchases of premises and equipment						Purchases of premises and equipment	(14,887)		(11,509)
Proceeds from bank owned life insurance						Proceeds from bank owned life insurance	4,101		2,907
Proceeds from sale of premises and equipment						Proceeds from sale of premises and equipment	3,897		1,910
Purchases of low income housing tax credits						Purchases of low income housing tax credits	(23,318)		(63,349)

Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	733,740		(248,647)

Table of Contents

STERLING BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

Six months ended
June 30,
2020 2019
Redemptions of FHLB and FRB stock, net 58,139 49,130
Proceeds from sales of other real estate owned 3,237 8,595
Purchases of premises and equipment (11,509) (10,992)
Proceeds from bank owned life insurance 2,907 2,457
Proceeds from sale of premises and equipment 1,910 4,835
Purchases of low income housing tax credits (63,349) (32,649)
Cash paid for acquisition, net — (515,692)
Net cash (used in) provided by investing activities (248,647) 1,314,177
Cash flows from financing activities:
Net increase (decrease) in transaction, savings and money market deposits 1,995,896 (369,213)
Net (decrease) increase in certificates of deposit (812,704) 105,590
Net (decrease) in short-term FHLB borrowings (195,000) (147,000)
Advances of term FHLB borrowings 375,000 1,325,000
Repayments of term FHLB borrowings (1,450,000) (2,250,000)
Advances under the Paycheck Protection Program Liquidity Facility 568,350 —
Repayment of Senior Notes (173,373) (6,954)
Net increase (decrease) in other borrowings 3,770 (437)
Net increase in mortgage escrow funds 11,370 285
Proceeds from stock option exercises 515 1,889
Treasury shares repurchased (81,032) (247,203)
Cash dividends paid - common stock (27,416) (29,690)
Cash dividends paid - preferred stock (4,387) (4,388)
Net cash provided by (used in) financing activities 210,989 (1,622,121)
Net (decrease) in cash and cash equivalents (4,422) (94,742)
Cash and cash equivalents at beginning of period 329,151 438,110
Cash and cash equivalents at end of period $ 324,729 $ 343,368
Supplemental cash flow information:
Interest payments $ 109,820 $ 144,243
Income tax payments 14,017 16,118
Real estate acquired in settlement of loans 732 2,654
Residential mortgage loans transferred from held for sale to portfolio — 127,833
Loans transferred from held for investment to held for sale 95,179 —
Redemption of bank owned life insurance, pending settlement — 60,491
Securities held to maturity transferred to available for sale — 708,627
Operating cash flows from operating leases 10,328 8,866
Right-of-use assets obtained in exchange for lease liabilities — 125,394
Acquisitions:
Non-cash assets acquired:
Total loans, net $ — $ 471,878
Accrued interest receivable — 1,789
Goodwill — 44,781
Other assets — 545
Total non-cash assets acquired — 518,993
Liabilities assumed:
Other liabilities — 3,301
Total liabilities assumed — 3,301
Net non-cash assets acquired — 515,692
Total consideration paid $ — $ 515,692


	Six months ended
	June 30,
	2021		2020

Cash flows from financing activities:
Net increase in transaction, savings and money market deposits	590,266		1,995,896
Net decrease in certificates of deposit	(562,569)		(812,704)
Net decrease in short-term FHLB borrowings	(382,000)		(195,000)
Advances of term FHLB borrowings	0		375,000
Repayments of term FHLB borrowings	0		(1,450,000)
Advances under the Paycheck Protection Program Liquidity Facility	0		568,350

Repayment of Senior Notes	0		(173,373)
Repayment of subordinated notes - Bank	(145,000)		0

Net (decrease) increase in other short term borrowings	(278,299)		3,770

Net increase in mortgage escrow funds	6,835		11,370
Stock options & other stock transactions, net	2,581		515
Common shares acquired related to stock compensation plan activity	(6,609)		(4,604)

Treasury shares repurchased	(27,325)		(81,032)
Cash dividends paid - common stock	(26,888)		(27,416)
Cash dividends paid - preferred stock	(4,387)		(4,387)
Net cash (used in) provided by financing activities	(833,395)		206,385
Net increase (decrease) in cash and cash equivalents	182,407		(4,422)
Cash and cash equivalents at beginning of period	305,002		329,151
Cash and cash equivalents at end of period	$	487,409	$	324,729
Supplemental cash flow information:
Interest payments	$	30,196	$	109,820
Income tax payments	14,446		14,017
Real estate acquired in settlement of loans	0		732


Loans transferred from held for investment to held for sale	235,719		95,179


Operating cash flows from operating leases	7,631		10,328

See accompanying notes to consolidated financial statements.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

(1) Basis of Financial Statement Presentation and Summary of Significant Accounting Policies

(a) Nature of Operations

Sterling Bancorp ~~(the~~(“Sterling”, the “Company,” “we,” “us” and “our” ) is a Delaware corporation, a bank holding company and a financial holding company headquartered in ~~Montebello,~~Pearl River, New York that owns all of the outstanding shares of common stock of Sterling National Bank (the “Bank”), its principal subsidiary. The Bank is a full-service regional bank specializing in the delivery of services and solutions to business owners, their families and consumers within the communities it serves through teams of dedicated and experienced relationship managers.

(b) Basis of Presentation

The consolidated financial statements in this Quarterly Report on Form 10-Q include the accounts of the Company and all other entities in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation. The accounting and financial reporting policies ~~we follow~~the Company follows conform, in all material respects, to accounting principles generally accepted in the United States (“GAAP”) and to general practices within the banking industry, which include regulatory reporting instructions.

The consolidated financial statements in this Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm, but, in the opinion of management, reflect all adjustments necessary for a fair presentation of our financial position and results of operations. All such adjustments were of a normal and recurring nature. The consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (the “SEC”). Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, ~~2019,~~2020, included in our Annual Report on Form 10-K, as filed with the SEC on February ~~28, 2020~~26, 2021 (the ~~“2019~~“2020 Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. Certain items in prior financial statements have been reclassified to conform to the current presentation. These reclassifications had no impact on previously reported net income.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expense and contingencies at the date of the financial statements. Actual results could differ significantly from these estimates, particularly the ~~allowance for credit losses~~ACL and the status of contingencies, and are subject to change.

(d) Definitive Merger Agreement with Webster Financial Corporation

On April 19, 2021, Webster Financial Corporation (NYSE: WBS) (“Webster”), the parent company of Webster Bank, National Association (“Webster Bank”), and Sterling, the parent company of the Bank, jointly announced that they had entered into a definitive agreement (the “Merger Agreement”) under which the companies will combine in an all stock merger of equals (the “Merger”). In May, Webster filed the necessary applications with federal regulators and in July we filed our joint proxy statement, with our stockholder vote scheduled for August. We continue to target a transaction close date in the fourth quarter of 2021, subject to regulatory and stockholder approval.

(e) Risks and Uncertainties - COVID-19

The ~~global~~COVID-19 pandemic resulting from the outbreak of the novel strain of coronavirus (“COVID-19”) has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the ~~institution of social distancing and sheltering~~resulting slow down in ~~place requirements in many states and communities. In particular, COVID-19~~global economic activity, has ~~disrupted our normal course of providing services~~continued to our clients and adversely impacted our clients. We have approved CARES Act conforming loan payment deferrals on outstanding loans totaling $1.7 billion at June 30, 2020. Continuation of economic and business disruption for an extended period could impair our client’s ability to fulfill their obligations to the Bank. In the six months ended June 30, 2020, we have successfully managed through the impacts of the pandemic to our colleagues and business operations. However, COVID-19 could negatively impact our business ~~continuity plans~~and our clients. In line with the continuing recovery in the ~~future.~~broader economy and in the New York metropolitan region, we saw further improvement in our operating results in the second quarter and first six months of 2021, when compared to the second quarter and first six months of 2020. However, there continues to be some uncertainty around the pace and sustainability of the economic recovery, which in combination with accomodative monetary policy, is creating downward pressure on yields and considerable competition for earning assets.Additionally, the New York metropolitan region was disproportionately impacted by the broader deterioration in macro-economic conditions and, while we have seen an uptick in economic activity in the region, it remains below pre-pandemic levels and has continued to dampen demand for our products.Against the backdrop of an improving macro-economic outlook and stabilization of key asset quality metrics our provision for credit losses - loans was $6.0 million and $16.0 million in the second quarter of 2021 and in the first six months of 2021, respectively, compared to $56.6 million and $193.2 million for the respective periods in 2020. In addition, non-interest income was $30.2 million in the second quarter of 2021 compared to $26.1 million in the second quarter of 2020 which reflects an increase in transaction volumes compared to the prior year period and improvement in many of our clients business operations.

We are dependent on the willingness and ability of our colleagues and clients to conduct banking and other financial transactions. If the United States response to COVID-19 is unsuccessful, or results in additional impacts, it is reasonably possible that we could experience a material adverse effect on our business, financial condition, results of operations, and cash flows, including material changes to our significant estimates. While it is not possible to know the full extent that COVID-19, and resulting measures in response thereto will have on our operations, we are disclosing potentially material items of which we are aware as of the date of this report. In particular, we have continued to review our loan and securities portfolios to identify specific exposures and sectors that may be more at risk or impacted by COVID-19. The majority of our loan payment deferrals highlighted above consist mainly of commercial real estate loans and equipment finance loans to borrowers in the hotel and lodging, retail and transportation industry sectors, and residential mortgage loans. Please see Note 4. “Loans” for details on loan payment deferrals by asset class. If the COVID-19 impact continues to for an extended period, we may need to establish a valuation allowance for deferred tax assets.

~~(e) Accounting Principle Change~~


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

~~Effective January 1, 2020,~~With uncertainty as to the trajectory of the ongoing pandemic, we ~~adopted Accounting Standards Update (“ASU”) 2016-13~~ ~~“ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement~~expect to see continued volatility in the broader economy and in the interest rate environment. Further, it is possible that the continuing threat to public health posed by COVID-19 may result in additional governmental actions that may impact our business and that of ~~Credit Losses on Financial Instruments”, which replaced~~our clients. A further downturn in the ~~prior incurred loss methodology with~~economic activity, at the national or regional level, especially if prolonged, could negatively impact the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, cause an ~~expected loss methodology that is referred to as~~increase in the ~~current expected credit loss (“CECL” or~~number of non-performing loans, impair the ~~“CECL Standard”). The measurement~~value of ~~expected credit losses under the CECL Standard is applicable to financial assets measured at amortized cost, including portfolio~~collateral securing loans, and ~~investment securities classified as held-to-maturity (“HTM”). It also applies to off-balance sheet credit exposures including loan commitments, standby letters~~cause significant property damage, all of ~~credit,~~which could negatively impact our operating results and financial guarantees and other similar instruments. In addition, the CECL Standard changes the accounting for investment securities classified as available-for-sale (“AFS”), including a requirement that estimated credit losses on AFS securities be presented as an allowance rather than as a direct write-down of the carrying balance of securities which we do not intend to sell, or believe that it is more likely than not, that we will be required to sell.condition.

~~We adopted~~The extent to which the ~~CECL Standard using~~ongoing pandemic could materially adversely affect the ~~modified retrospective method for all financial assets measured at amortized cost~~longer term business climate and ~~off-balance sheet credit exposures. As discussed further below, purchase credit deteriorated assets were measured~~therefore our business and results of operations will depend on a ~~prospective basis~~number of evolving factors and future developments that are difficult to predict. To the extent that the pandemic adversely affects our business, financial position, results of operations and/or cash flows, it may also have the effect of heightening many of the other risks we face, including the other risks described in ~~accordance with~~our Annual Report on Form 10-K for the ~~CECL Standard and all purchase credit impaired loans at~~year ended December 31, ~~2019 were considered purchase credit deteriorated loans upon adoption. Results for reporting periods beginning after January 1,~~ 2020, ~~are presented under the CECL Standard while prior period amounts continue to be reported in accordance with previously applicable accounting guidance.~~ filed on February 26, 2021.

(2) Securities

The ~~adoption~~following table summarizes our securities as of ~~the CECL Standard resulted in the following adjustments to our financial statements:~~

Change in consolidated balance sheet Tax effect Change to retained earnings from adoption of new accounting principle
Allowance for credit losses (“ACL”) - loans $ 68,088 $ 18,820 $ 49,268
ACL - loans - (adjustment related to purchase credit impaired loan mark)¹
22,496 — —
Total ACL - loans 90,584 18,820 49,268
ACL - HTM securities 796 220 576
ACL - off balance sheet credit exposure (recorded in other liabilities) 6,095 1,685 4,410
Total impact of CECL adoption $ 97,475 $ 20,725 $ 54,254

¹~~This amount represents gross-up of the balance~~June 30, 2021, including a summary of the amortized cost fair value and ACL related to HTM securities and the amortized cost, fair value of ~~purchase credit impaired loans that were considered purchase credit deteriorated loans on adoption~~AFS securities. The terms “MBS” refers to mortgage-backed securities and the term “CMOs” refers to collateralized mortgage obligations. Both of ~~the CECL Standard.~~these terms are further defined in Note 15. “Fair Value Measurements”:


	June 30, 2021
	Available for Sale						Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Fair value		ACL
Residential MBS:
Agency-backed	$	881,777	$	35,346	$	(200)	$	916,923	$	74,810	$	2,813	$	0	$	77,623	$	0
CMOs/Other MBS	263,417		11,143		0		274,560		0		0		0		0		0
Total residential MBS	1,145,194		46,489		(200)		1,191,483		74,810		2,813		0		77,623		0
Other securities:
US Treasury and federal agencies	380,034		5,248		(463)		384,819		24,871		529		0		25,400		0
Corporate	685,058		32,924		(2,840)		715,142		19,824		729		0		20,553		35
State and municipal	364,754		14,917		(115)		379,556		1,558,964		112,986		(53)		1,671,897		700

Other	0		0		0		0		17,750		153		(114)		17,789		14
Total other securities	1,429,846		53,089		(3,418)		1,479,517		1,621,409		114,397		(167)		1,735,639		749
Total securities	$	2,575,040	$	99,578	$	(3,618)	$	2,671,000	$	1,696,219	$	117,210	$	(167)	$	1,813,262	$	749

~~The table below presents additional details on the impact of the adoption of the CECL Standard on HTM securities, portfolio loans and off-balance sheet credit exposures as of January 1, 2020:~~

As reported under CECL Prior to CECL Standard adoption Impact of CECL adoption
Assets:
ACL - HTM securities:
Corporate and other $ 108 $ — $ 108
State and municipal 688 — 688
Total ACL - HTM securities 796 — 796
ACL - loans $ 196,822 $ 106,238 $ 90,584
Liabilities:
ACL - off-balance sheet credit exposures (recorded in other liabilities) $ 6,749 $ 654 $ 6,095

Under prior GAAP, our allowance for loan and lease losses (“ALLL”) was determined under the incurred loss model, using an average of actual losses incurred over the most recent three-year period and the application of qualitative factors to arrive at an allowance that represented our best estimate of probable credit losses inherent in our loan portfolio. Under the CECL Standard, our ACL is based on an


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

~~estimate~~

A summary of ~~all amounts that are not expected to be collected over the contractual life~~amortized cost and estimated fair value of ~~the portfolio loans, which~~securities as of December 31, 2020 is ~~comprised of quantitative and qualitative factors.~~presented below:


	December 31, 2020
	Available for Sale										Held to Maturity
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrecognized gains		Gross unrecognized losses		Fair value		ACL
Residential MBS:
Agency-backed	$	873,358	$	44,911	$	(9)	$	918,260	$	104,329	$	4,100	$	0	$	108,429	$	0
CMOs/Other MBS	352,473		20,811		0		373,284		0		0		0		0		0
Total residential MBS	1,225,831		65,722		(9)		1,291,544		104,329		4,100		0		108,429		0
Other securities:
Federal agencies	149,852		6,615		0		156,467		24,811		844		0		25,655		0
Corporate	438,226		27,334		(2,048)		463,512		19,851		535		0		20,386		75
State and municipal	369,186		18,090		(181)		387,095		1,575,596		126,575		(69)		1,702,102		1,379

Other	0		0		0		0		17,750		189		(7)		17,932		45
Total other securities	957,264		52,039		(2,229)		1,007,074		1,638,008		128,143		(76)		1,766,075		1,499
Total securities	$	2,183,095	$	117,761	$	(2,238)	$	2,298,618	$	1,742,337	$	132,243	$	(76)	$	1,874,504	$	1,499

As of December 31, 2019, a significant portion of our loans were acquired in business combination transactions that were subject to purchase accounting adjustments, which incorporated life of loan losses estimates at the date of acquisition into the estimate of theThe amortized cost and estimated fair value of securities at June 30, 2021 are presented below by contractual maturity. Actual maturities may differ from contractual maturities because issuers may have the ~~loan. To the extent the loan continued~~right to ~~perform as expected~~call or prepay obligations. Residential MBS are shown separately since ~~the date of acquisition, we generally did~~they are not ~~apply amounts from our allowance for loan losses methodology to such loans. At December 31, 2019, our allowance for loan losses of $106.2 million was recorded as~~due at a valuation account against $15.4 billion of our portfolio loans. Acquired loans of $6.0 billion did not have an allowance for loan loss allocation as those loans had remaining purchase accounting adjustments. The composition of our portfolio loans at December 31, 2019 was the following:

At December 31, 2019 December 31, 2019
Originated Acquired Total ALLL
Commercial and industrial $ 6,982,226 $ 1,250,493 $ 8,232,719 $ 52,548
Commercial mortgage⁽¹⁾
7,788,749 2,974,100 10,762,849 44,137
Residential mortgage 541,681 1,668,431 2,210,112 7,598
Consumer 121,310 113,222 234,532 1,955
Total $ 15,433,966 $ 6,006,246 $ 21,440,212 $ 106,238
single maturity date.


	June 30, 2021
	Available for sale				Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
Remaining period to contractual maturity:
One year or less	$	1,914	$	1,911	$	28,453	$	28,717
One to five years	368,570		380,544		78,748		82,744
Five to ten years	684,198		713,149		395,588		421,669
Greater than ten years	375,164		383,913		1,118,620		1,202,509
Total securities with a stated maturity date	1,429,846		1,479,517		1,621,409		1,735,639
Residential MBS	1,145,194		1,191,483		74,810		77,623
Total securities	$	2,575,040	$	2,671,000	$	1,696,219	$	1,813,262

~~(1) Commercial mortgage includes commercial real estate, multi-family and ADC loans.~~

~~The increase in the ACL - loans from the adoption of the CECL Standard included the following adjustments:~~

ALLL as of December 31, 2019 Adjustments recorded as of January 1, 2020 ACL as of January 1, 2020
CECL Day 1 PCD gross-up
Commercial and industrial $ 52,548 $ 44,675 $ 6,624 $ 103,847
Commercial mortgage 44,137 21,384 1,440 66,961
Residential mortgage 7,598 942 13,162 21,702
Consumer 1,955 1,087 1,270 4,312
Total $ 106,238 $ 68,088 $ 22,496 $ 196,822

Loans designated as purchased credit impaired (“PCI”) loans and accounted for under Accounting Standards Codification (“ASC”) 310-30 were designated as purchased with credit deterioration (“PCD”) loans. In accordance with the CECL Standard, we did not reassess whether PCI loans met the criteria of PCD loans as of the date of adoption, and determined all PCI loans were PCD loans. On January 1, 2020, the amortized cost basis of PCD loans totaled $116.3 million. We recorded an increase to the balance of PCD loans and an increase to the ACL - loans of $22.5 million, which represented the expected credit losses for PCD loans. The remaining non-credit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2020 over the remaining estimated life of the loans. Also, in accordance with the CECL Standard, we did not reassess whether modifications to individual acquired financial assets were troubled debt restructurings (“TDRs”) as of the date of adoption.

Investment Securities: Investment securities are classified as HTM and carried at amortized cost when management has the intent and ability to hold them to maturity. Investment securities not classified as HTM or trading are classified as AFS. Securities AFS are carried at fair value, with unrealized holding gains and losses reported in comprehensive income, net of tax.

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are generally amortized using the level-yield method without estimating prepayments, except for mortgage-backed securities, where prepayment rates are estimated. Premiums on callable investment securities are amortized to their earliest call date. Gains and losses on sales of securities are recorded on the trade date and determined using the specific identification method.

An investment security is placed on non-accrual status when management concludes it will not receive all principal and interest in a timely fashion in accordance with the terms of the security. Interest accrued but not received for a security placed on non-accrual is reversed against interest income. At June 30, 2020 and December 31, 2019, there were no securities placed on non-accrual.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

ACL - HTM securities: HTM securities include residential mortgage-backed securities issued by government agencies, federal agency securities, corporate securities, state and municipal securities and other securities. We estimate expected credit losses on HTM securities individually using a discounted cash flow methodology. Our expected loss model estimates the probability of default and loss given default based on the security rating, historical loss rates by security ratings, whether the issuer continues to make timely principal and interest payments in accordance with the contractual terms of the security, and reasonable and supportable forecasts. For unrated state and municipal securities, we perform an internal credit evaluation and assign a rating to the security for ACL - HTM securities modeling purposes. The loss given default is estimated by security, and the aggregate amount results in the estimated ACL - HTM securities balance. Included in state and municipal securities at June 30, 2020 were non-rated securities of $108.4 million, which consisted mainly of short-term general obligation securities and bond anticipation notes and tax anticipation notes issued by jurisdictions in New York state.

At June 30, 2020 and December 31, 2019, all of our residential mortgage-backed and federal agency securities were issued by U.S. government entities or agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by a nationally recognized statistical rating organization and have had no historical credit defaults. We expect these securities are fully collectible, as these securities are backed by the full faith and credit of, or directly guaranteed by, the U.S. Government. Accordingly, we established no ACL for such securities.

Accrued interest receivable on HTM investment securities totaled $16.5 million at both June 30, 2020 and December 31, 2019, and is excluded from the estimate of ACL. Accrued interest receivable on HTM investment securities is included in accrued interest receivable on the consolidated balance sheets.

ACL - on investment securities classified as AFS: For AFS investment securities which are in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of the amortized cost basis. If either of the criteria is met, the amortized cost basis of the security is written down to fair value through income. For AFS investment securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from an actual or estimated credit loss event or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, changes to the rating of the security, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss is likely, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, an ACL is recorded for the estimated credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.

Changes in the ACL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when we believe the uncollectibility of an AFS security has been confirmed or if either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on AFS investment securities totaled $12.1 million and $12.8 million at June 30, 2020 and December 31, 2019, respectively, and is excluded from the estimate of credit losses. Accrued interest receivable on AFS investment securities is included in accrued interest receivable on the consolidated balance sheets.

Portfolio loans: Portfolio loans are loans we have the intent and ability to hold for the foreseeable future, or until maturity or payoff, and are reported at amortized cost. The amortized cost is the principal balance outstanding, net of purchase premiums and discounts, including purchase accounting adjustments from prior merger transactions, deferred loan fees and costs. Accrued interest receivable on portfolio loans totaled $72.7 million and $71.0 million at June 30, 2020 and December 31, 2019, respectively, and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. For portfolio loans with a term of one year or more, loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Generally, interest income is discontinued on portfolio loans and loans are placed on non-accrual status at the earlier of: (i) when we determine the borrower may likely be unable to meet contractual principal or interest obligations; or (ii) when the loan is 90 days delinquent unless the loan is well secured and in process of collection. Consumer loans are generally charged-off no later than 120 days past due unless the loan is in the process of collection. For other portfolio loans, when we conclude the collateral and/or debt service capacity of the borrower are insufficient to repay the loan, we charge-off the amount that is deemed uncollectible. Past due status is based on the contractual terms of the loan.


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

All interest accrued but not received on loans placed on non-accrual is reversed against interest income. Interest received on such loans is generally accounted for under the cost-recovery method, until the loan qualifies to be returned to accrual status. Under the cost-recovery method, interest income is not recognized until the loan balances is reduced to zero. We may elect to account for interest receipts on non-accrual loans on a cash-basis when we have determined we are in a well-secured position. Under the cash basis method, interest income is recorded when cash payments are received. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

PCD Loans: We have acquired loans through direct purchase and, more often, in merger transactions, some of which have experienced more than an insignificant credit deterioration since origination. Criteria we consider to determine whether a loan should be designated PCD includes, but is not limited to, the following: (i) loans delinquent over 60 days as of the date of acquisition; (ii) loans downgraded and rated special mention or worse as of the date of acquisition; (iii) loans on non-accrual; and (iv) loans deemed collateral dependent as of the date of acquisition. PCD loans are recorded at the purchase price paid. An ACL is determined using the same methodology as for other portfolio loans and the sum of the purchase price and ACL represents the initial amortized cost basis of the loan. The difference between the initial amortized cost basis and the par value of the loan represents either a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the ACL are recorded through provision expense. The only loans classified as PCD as of June 30, 2020 are loans that were formerly classified as PCI loans under the incurred loss model at adoption of the CECL Standard.

ACL - Loans: The ACL - loans is a valuation account that is deducted from the amortized cost basis of portfolio loans to present the net amount expected to be collected on portfolio loans over their contractual life. Loans are charged-off against the allowance when we believe the uncollectibility of a loan balance has been confirmed, and the expected recoveries do not exceed the aggregate of amounts previously charged-off or expected to be charged-off.

We estimate the balance of the ACL - loans using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The methodologies for estimating the ACL - loans apply historical loss information, adjusted for current loan-specific risk characteristics such as differences in underwriting standards, portfolio composition, delinquency levels, loan terms, changes in environmental conditions such as changes in GDP, unemployment rates, credit spreads, property values, and other relevant factors, that are reasonable and supportable, to the identified financial assets for which the historical loss experience was observed. Our methodologies revert back to historical loss information at the individual macro variable level, which begins in two to three years and converges to its long-run equilibrium, when we can no longer develop reasonable and supportable forecasts.

The ACL - loans is measured on a collective (pool) basis when similar risk characteristics exist. We measure our warehouse lending portfolio and certain consumer loans at the loan level. Generally, for all other loan types, the estimated expected credit loss is also calculated at the loan level and pool assignments are only utilized for aggregating the allowance estimates of similar loan types for financial statement disclosure purposes. We have identified the following portfolio segments and estimate our ACL - loans using the following methods:

~~Portfolio segment~~

~~ACL Methodology~~

~~Risk characteristics~~

~~Portfolio composition~~

~~Traditional Commercial and Industrial~~

~~Loss rate~~

~~Actual cash flow varies from amounts estimated, changes in collateral value, business not successful~~

Various types of secured and unsecured traditional C&I loans to small and medium-sized businesses in our market area, including loans collateralized by assets, such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets.

~~Asset-based lending (“ABL”)~~

~~Loss rate~~

~~Actual cash flow varies from amounts estimated, borrower unable to collect accounts receivable or convert inventory, uncertain value of collateral~~

Loans to mid-size businesses on a national basis. ABL loans are secured with a blanket lien on all business assets and will include direct control and supervision of accounts receivable, inventory, machinery and equipment and real estate collateral.


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~Portfolio segment~~

~~ACL Methodology~~

~~Risk characteristics~~

~~Portfolio composition~~

~~Payroll finance~~

~~Loss rate~~

~~Inability to collect on accounts receivable, delays in accounts receivable turnover~~

Financing and business process outsourcing, including full back-office, technology and tax accounting services, to independently-owned temporary staffing companies nationwide. Loans typically are structured as an advance used by our clients to fund their employee payroll and are outstanding on average for 40 to 45 days.

~~Warehouse lending~~

~~No historical losses, qualitative overlay~~

~~Inability to sell underlying mortgage loan collateral into the secondary market~~

Residential mortgage warehouse funding facilities to non-bank mortgage companies. These loans consist of a line of credit used as temporary financing during the period between the closing of a mortgage loan until its sale into the secondary market, which on average occurs 20 days of the original loan closing.

~~Factored receivables~~

~~Loss rate~~

~~Inability to collect on accounts receivable, delays in accounts receivable turnover~~

The purchase of a client’s accounts receivable is traditionally known as “factoring” and results in payment by the client of a factoring fee, which is generally a percentage of the factored receivables or sales volume, which is designed to compensate the Bank for the bookkeeping and collection services provided and, if applicable, its credit review of the client’s customer and assumption of customer credit risk.

~~Equipment financing~~

~~Loss rate~~

~~Actual cash flow varies from amounts estimated, changes in collateral value~~

Equipment financing loans are offered through direct lending programs, third-party sources and vendor programs nationally. Our equipment finance lending mainly includes full payout term loans and secured loans for various types of business equipment.

~~Public sector finance~~

~~DCF~~

~~Municipal tax / revenue receipts insufficient to service debt; loss of access to capital markets~~

Loans to state, municipal and local government entities nationally. Loans are either secured by equipment, or are obligations that are backed by the ability to levy taxes, either generally or associated with a specific project.

~~Commercial real estate/ multi-family (“CRE”)~~

~~PD/LGD for non-owner occupied and loss rate for owner occupied~~

~~Actual cash flow varies from amounts estimated, changes in collateral value~~

CRE loans secured mainly by first liens on properties, including retail properties, office buildings, nursing homes, hotels, motels or restaurants, warehouses, schools and industrial complexes. To a lesser extent, we originate CRE loans for recreation, medical use, land, gas stations, not for profit and other categories. These loans are generally secured by properties located in our primary market area.

~~Acquisition, development and construction~~

~~PD/LGD~~

~~Construction costs are greater than anticipated, changes in estimated collateral value, project completion~~

Construction loans are made in accordance with a schedule reflecting the cost of construction. Repayment of construction loans on residential subdivisions is normally expected from the sale of units to individual purchasers, except in cases of owner occupied construction loans. In the case of income-producing property, repayment is usually expected from permanent financing upon completion of construction. We provide permanent mortgage financing on most of our construction loans on income-producing property.

~~Residential mortgage and home equity lines of credit~~

~~PD/LGD~~

~~Product type, conforming vs. non-conforming, interest only, converted interest only, amortizing, FICO score, LTV~~

~~Residential mortgage conforming and non-conforming, fixed-rate and adjustable rate mortgage (“ARM”) loans with maturities up to 30 years. Also includes home equity lines of credit.~~

~~Other consumer loans~~

~~8 quarter historical loss~~

~~FICO, LTV, product type~~

~~Other consumer loans consist of loans for personal use.~~

Under the loss rate method, expected credit losses are estimated using a loss rate that is multiplied by the amortized cost of the asset at the balance sheet date. For each loan segment identified above, we apply an expected historical loss trend based on third-party loss estimates, correlate them to observed economic metrics and reasonable and supportable forecasts of economic conditions and overlay qualitative factors as determined by management.

Under the discounted cash flow method, expected credit losses are determined by comparing the amortized cost of the asset at the balance sheet date to the present value of estimated future principal and interest payments expected to be collected over the remaining


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

life of the asset. Our loss model generates cash flow projections at the loan level based on reasonable and supportable projections, from which we estimate payment collections adjusted for curtailments, recovery time, probability of default and loss given default.

Under the probability of default and loss given default method, expected credit losses are calculated by multiplying the probability that the asset will default within a given time frame (“PD”) by the percentage of the asset that is not expected to be collected due to default (“LGD”), and multiplying this factor by the amortized cost of the asset at the balance sheet date. The PD and LGD are calculated based on third party historical information of loan performance, real estate prices and other factors, adjusted for current conditions and reasonable and supportable forecasts.

~~Qualitative loss factors are based on our judgement of company, market, industry or business specific data, loan trends, changes in portfolio segment composition, delinquency and loan rating.~~

When a foreclosure is deemed probable, we estimate the fair value of the collateral at the reporting date to record the net carrying amount of the asset and determine the ACL. When repayment is dependent upon the sale of the collateral, the fair value of the collateral is adjusted for estimated costs to sell. If repayment depends on the operation, rather than the sale, of the collateral, an estimate for cost to sell is not included in the fair value of the collateral.

Determining the Contractual Term: Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayment rates when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: we have a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower, or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by us.

TDRs: A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. The ACL on a TDR is measured using the same method as all other portfolio loans, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

ACL on Off-Balance Sheet Credit Exposures: We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation, unless that obligation is unconditionally cancellable by us. The ACL on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Generally, expected credit losses on commitments is based on historical losses on similar portfolio segments, economic conditions, and qualitative factors.

Our off-balance sheet credit exposures include mainly loan origination commitments on construction loans, unused committed lines on traditional commercial and industrial loans, asset-based lending loans, equipment finance loans, warehouse lending loans, and standby and performance-based letters of credit. See Note 15 “Commitments and Contingencies” for additional information.

Macroeconomic Assumptions: We rely on economic models and forecast assumptions developed by Moody’s Analytics, Inc. (“Moody’s”), our principal CECL vendor, in measuring our estimate of the ACL. The key forecast assumptions that drive the economic models are presented for approval to our CECL committee, which is comprised of representatives from finance, credit and risk and then incorporated into the expected loss models. The macroeconomic model scenarios are updated on a quarterly basis.

~~(2) Acquisitions~~

~~Equipment finance loan and lease portfolio and origination platform acquired from Santander Bank (“Santander”)~~

On November 29, 2019, the Bank acquired an equipment finance loan and lease portfolio consisting of equipment finance loans, sales-type leases and operating leases from Santander (the “Santander Portfolio Acquisition”). In addition, the Bank obtained relationship management and business development personnel who will continue to manage the acquired loan and lease portfolio and originate new loans and leases. The total consideration paid in cash at closing was $846.1 million. We acquired $764.0 million of equipment finance loans and leases (classified as portfolio loans on the consolidated balance sheet), and $74.8 million of operating leases (classified as other assets on the consolidated balance sheet). The fair value of these loans and leases was $820.1 million at the time of acquisition. The Bank paid a premium of 0.75% on the unpaid principal balance of the loans or $6.3 million. The transaction was accounted for as a business combination. We recorded a $5.1 million restructuring charge consisting mainly of ~~severance, retention, systems integration expense and facilities consolidation, which~~ is included in charge for asset write-downs, retention and severance on the consolidated income statement. The acquired loans and origination platform have been fully integrated into our equipment finance business.


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~Commercial loan portfolio and origination platform acquired from Woodforest National Bank (“Woodforest”)~~

On February 28, 2019, the Bank acquired a commercial loan portfolio consisting of equipment finance loans and leases and asset-based lending loans from Woodforest (the “Woodforest Acquisition”). In addition, the Bank obtained sales and relationship management and business development personnel based in Novi, Michigan, who will continue to originate new loans and leases. The total consideration paid in cash at closing was $515.7 million. We acquired $166.1 million of equipment finance loans, and $331.8 million of asset-based lending loans, which are mainly variable rate loans. The fair value of these loans and leases was $471.9 million at the time of acquisition. The Bank paid a premium of 3.75% on the unpaid principal balance of the loans or $18.7 million. The transaction was accounted for as a business combination. We recorded a $3.3 million restructuring charge consisting mainly of ~~severance, retention, systems integration expense and facilities consolidation, which~~ is included in charge for asset write-downs, retention and severance on the consolidated income statements. The acquired loans and origination platform have been fully integrated into our asset-based lending and equipment finance business lines.

~~(3) Securities~~

The following table summarizes the amortized cost, fair value, and ACL related to HTM securities, the amortized cost and fair value related to AFS securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income and gross unrecognized gains and losses at June 30, 2020. The terms “MBS” refers to mortgage-backed securities and the term “CMOs” refers to collateralized mortgage obligations. Both of these terms are further defined in Note 16. “Fair Value Measurements”:

June 30, 2020
Available for Sale Held to Maturity
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value Amortized
cost Gross
unrecognized
gains Gross
unrecognized
losses Fair
value Allowance for credit losses
Residential MBS:
Agency-backed $ 1,086,303 $ 55,323 $ (23) $ 1,141,603 $ 144,861 $ 6,079 $ — $ 150,940 $ —
CMOs/Other MBS 439,718 24,843 — 464,561 — — — — —
Total residential MBS 1,526,021 80,166 (23) 1,606,164 144,861 6,079 — 150,940 —
Other securities:
Federal agencies 140,072 6,845 — 146,917 59,600 1,400 — 61,000 —
Corporate 451,406 20,218 (2,230) 469,394 19,878 111 (48) 19,941 70
State and municipal 381,318 17,109 (278) 398,149 1,690,365 100,177 (721) 1,789,821 2,384
Other — — — — 12,750 — (119) 12,631 45
Total other securities 972,796 44,172 (2,508) 1,014,460 1,782,593 101,688 (888) 1,883,393 2,499
Total securities $ 2,498,817 $ 124,338 $ (2,531) $ 2,620,624 $ 1,927,454 $ 107,767 $ (888) $ 2,034,333 $ 2,499


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~A summary of amortized cost and estimated fair value of securities as of December 31, 2019 is presented below:~~

December 31, 2019
Available for Sale Held to Maturity
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value Amortized
cost Gross
unrecognized
gains Gross
unrecognized
losses Fair
value
Residential MBS:
Agency-backed $ 1,595,766 $ 20,385 $ (1,032) $ 1,615,119 $ 168,743 $ 1,827 $ (75) $ 170,495
CMOs/Other MBS 508,217 4,104 (44) 512,277 — — — —
Total residential MBS 2,103,983 24,489 (1,076) 2,127,396 168,743 1,827 (75) 170,495
Other securities:
Federal agencies 196,809 4,582 (253) 201,138 59,475 822 — 60,297
Corporate 307,050 13,917 (45) 320,922 19,904 415 — 20,319
State and municipal 435,213 11,321 (342) 446,192 1,718,789 70,530 (134) 1,789,185
Other — — — — 12,750 147 (2) 12,895
Total other securities 939,072 29,820 (640) 968,252 1,810,918 71,914 (136) 1,882,696
Total securities $ 3,043,055 $ 54,309 $ (1,716) $ 3,095,648 $ 1,979,661 $ 73,741 $ (211) $ 2,053,191

The amortized cost and estimated fair value of securities at June 30, 2020 are presented below by contractual maturity. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential MBS are shown separately since they are not due at a single maturity date.

June 30, 2020
Available for sale Held to maturity
Amortized
cost Fair
value Amortized
cost Fair
value
Remaining period to contractual maturity:
One year or less $ 2,100 $ 2,104 $ 47,649 $ 48,022
One to five years 181,136 191,001 75,121 77,499
Five to ten years 495,508 513,517 360,210 383,498
Greater than ten years 294,052 307,838 1,299,613 1,374,374
Total securities with a stated maturity date 972,796 1,014,460 1,782,593 1,883,393
Residential MBS 1,526,021 1,606,164 144,861 150,940
Total securities $ 2,498,817 $ 2,620,624 $ 1,927,454 $ 2,034,333


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

Sales and calls of securities for the periods indicated below were as follows:

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
Available for sale:
Proceeds from sales $ 52,470 $ — $ 459,994 $ 738,751
Gross realized gains 485 — 8,964 4,355
Gross realized losses — (528) (68) (18,067)
Income tax expense (benefit) on realized net gains / (losses) 61 (111) 112 (2,880)
Proceeds from calls $ — $ — $ 139,777 $ —
Gross realized gains — — 4,909 —
Gross realized (losses) — — (29) —
Income tax expense on realized net gains — — 610 —

~~We adopted ASU 2017-12,~~ ~~“Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities,”~~ ~~as of January 1, 2019,~~which allowed us to reclassify a debt security from HTM to AFS if the debt security is eligible to be hedged under the last-of-layer method in accordance with ASU 2017-12. Generally, this included debt securities that are pre-payable, including MBS, and debt securities that are callable by the issuer, which are applicable to many of our state and municipal debt securities. We transferred HTM securities with a book value of $720.4 million and a fair value of $708.6 million at December 31, 2018 to AFS effective January 1, 2019. In the first quarter of 2019, we sold securities with a book value of $751.9 million to raise liquidity for the Woodforest Acquisition, and to reduce lower yielding securities as a percentage of total assets.


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Available for sale:
Proceeds from sales	$	0	$	52,470	$	20,706	$	459,994
Gross realized gains	0		485		1,236		8,964
Gross realized losses	0		0		(530)		(68)
Income tax expense on realized net gains	0		61		138		112
Proceeds from calls	$	17,055	$	0	$	20,005	$	139,777
Gross realized gains	16		0		47		4,909
Gross realized losses	(96)		0		(114)		(29)
Income tax (benefit) expense on realized net (loss) gains	(16)		0		(13)		610

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders’ equity, other than securities issued by the U.S. federal government and its agencies.


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

The following table summarizes AFS securities with unrealized losses ~~in an unrealized loss position~~ for which an ACL has not been recorded at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 aggregated by major security type and length of time in a continuous unrealized loss position:

Continuous unrealized loss position
Less than 12 months 12 months or longer Total
Fair
value Unrealized losses Fair
value Unrealized losses Fair
value Unrealized losses
AFS
June 30, 2020
Residential MBS:
Agency-backed $ 3,148 $ (2) $ 2,028 $ (21) $ 5,176 $ (23)
Other securities:
Corporate 135,398 (2,188) 1,990 (42) 137,388 (2,230)
State and municipal 5,584 (48) 14,492 (230) 20,076 (278)
Total other securities 140,982 (2,236) 16,482 (272) 157,464 (2,508)
Total securities $ 144,130 $ (2,238) $ 18,510 $ (293) $ 162,640 $ (2,531)
December 31, 2019
Residential MBS:
Agency-backed $ 98,350 $ (317) $ 108,052 $ (715) $ 206,402 $ (1,032)
CMOs/Other MBS — — 5,916 (44) 5,916 (44)
Total residential MBS 98,350 (317) 113,968 (759) 212,318 (1,076)
Other securities:
Federal agencies 39,573 (253) — — 39,573 (253)
Corporate — — 12,006 (45) 12,006 (45)
State and municipal 12,795 (94) 14,651 (248) 27,446 (342)
Total other securities 52,368 (347) 26,657 (293) 79,025 (640)
Total securities $ 150,718 $ (664) $ 140,625 $ (1,052) $ 291,343 $ (1,716)


	Continuous unrealized loss position
	Less than 12 months				12 months or longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
AFS
June 30, 2021
Residential MBS:
Agency-backed	$	57,518	$	(194)	$	262	$	(6)	$	57,780	$	(200)


Other securities:
US Treasury and federal agencies	90,135		(463)		0		0		90,135		(463)
Corporate	124,236		(2,840)		0		0		124,236		(2,840)
State and municipal	1,650		(5)		8,084		(110)		9,734		(115)


Total other securities	216,021		(3,308)		8,084		(110)		224,105		(3,418)
Total securities	$	273,539	$	(3,502)	$	8,346	$	(116)	$	281,885	$	(3,618)
December 31, 2020
Residential MBS:
Agency-backed	$	396	$	(1)	$	1,970	$	(8)	$	2,366	$	(9)


Other securities:

Corporate	83,191		(2,048)		0		0		83,191		(2,048)
State and municipal	2,507		(29)		10,872		(152)		13,379		(181)

Total other securities	85,698		(2,077)		10,872		(152)		96,570		(2,229)
Total securities	$	86,094	$	(2,078)	$	12,842	$	(160)	$	98,936	$	(2,238)

~~The adoption of CECL did not have an impact on our accounting for AFS securities.~~ We regularly review AFS securities for impairment resulting from credit losses using both qualitative and quantitative criteria, and based on the composition of the portfolio at each reporting period. Unrealized losses on corporate and state and municipal securities have not been recognized into income because the issuers are of high credit quality, ~~and~~because we do not intend to sell and because it is ~~likely~~unlikely that we will ~~not~~ be required to sell the securities prior to their anticipated recovery. The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. The fair value is expected to recover as the securities approach maturity.

At June 30, 2020, a total of 40 AFS securities were in a continuous unrealized loss position for less than 12 months and 76 AFS securities were in a continuous unrealized loss position for 12 months or longer.

2013


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

At June 30, 2021, a total of 32 AFS securities were in a continuous unrealized loss position for less than 12 months and 48 AFS securities were in a continuous unrealized loss position for 12 months or longer.

At June 30, 2021 and December 31, 2020, accrued interest receivable on AFS securities was $12.9 million and $10.9 million, respectively. Accrued interest receivable on AFS securities is included in accrued interest receivable on the consolidated balance sheets. The following table summarizes HTM securities ~~HTM~~ with unrecognized losses, segregated by the length of time in a continuous unrecognized loss position for the periods presented below:

Continuous unrecognized loss position
Less than 12 months 12 months or longer Total
Fair
value Unrecognized losses Fair
value Unrecognized losses Fair
value Unrecognized losses
HTM
June 30, 2020
Other securities:
Corporate $ 9,952 $ (48) $ — $ — $ 9,952 $ (48)
State and municipal 25,681 (618) 7,159 (103) 32,840 (721)
Other 7,631 (119) — — 7,631 (119)
Total securities $ 43,264 $ (785) $ 7,159 $ (103) $ 50,423 $ (888)
December 31, 2019
Residential MBS:
Agency-backed $ 39,732 $ (69) $ 1,598 $ (6) $ 41,330 $ (75)
Other securities:
State and municipal 177 (2) 8,258 (132) 8,435 (134)
Other 9,998 (2) — — 9,998 (2)
Total other securities 10,175 (4) 8,258 (132) 18,433 (136)
Total securities $ 49,907 $ (73) $ 9,856 $ (138) $ 59,763 $ (211)


	Continuous unrecognized loss position
	Less than 12 months				12 months or longer				Total
	Fair value		Unrecognized losses		Fair value		Unrecognized losses		Fair value		Unrecognized losses
HTM
June 30, 2021




Other securities:


State and municipal	$	0	$	0	$	3,912	$	(53)	$	3,912	$	(53)
Other	14,886		(114)		0		0		14,886		(114)

Total securities	$	14,886	$	(114)	$	3,912	$	(53)	$	18,798	$	(167)
December 31, 2020




Other securities:


State and municipal	$	105	$	(1)	$	4,386	$	(68)	$	4,491	$	(69)
Other	9,993		(7)		0		0		9,993		(7)
Total other securities	10,098		(8)		4,386		(68)		14,484		(76)
Total securities	$	10,098	$	(8)	$	4,386	$	(68)	$	14,484	$	(76)

The following table presents the activity in the ACL - HTM securities by type of security for the six month ~~period~~periods ended June 30, 2021 and 2020:

Type of security
Corporate and Other State and municipal
ACL - HTM:
Balance at December 31, 2019 $ — $ —
Impact of adoption on January 1, 2020 108 688
Provision for credit loss expense recorded in the six months ended June 30, 2020 7 1,696
Total ACL - HTM at June 30, 2020 $ 115 $ 2,384


	June 30, 2021				June 30, 2020
	Type of security				Type of security
	Corporate and Other		State and municipal		Corporate and Other		State and municipal
ACL - HTM:
Balance at beginning of period	$	120	$	1,379	$	0	$	0
Impact of adoption on January 1, 2020	0		0		108		688
Provision for credit loss	(71)		(679)		7		1,696
Total ACL - HTM at end of period	$	49	$	700	$	115	$	2,384

The ACL - HTM securities was estimated using a discounted cash flow approach. We discounted the expected cash flows using the effective interest rate inherent in the security. For floating rate securities, we projected interest rates using forward interest rate curves. We review the term structures for probability of default, probability of prepayment and loss given default. We estimate a reasonable and supportable term of three years, ~~which was supported by~~based on our back testing process.

At June 30, 2021 and December 31, 2020, accrued interest receivable on HTM securities was $15.5 million and $15.6 million, respectively, and was excluded from the estimate of ACL - HTM securities. Accrued interest receivable on HTM securities is included in accrued interest receivable on the consolidated balance sheets.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

Credit Quality Indicators

We monitor the credit quality of HTM investment securities through the use of credit ratings, internal reviews and analysis of financial information and other data, and external reviews from a third-party vendor. We monitor credit quality indicators at least quarterly, and all credit ratings were updated and reviewed as of June 30, ~~2020.~~2021. At June 30, ~~2020, a total of 7~~2021, 3 HTM securities were in a continuous unrealized loss position for less than 12 months and 4126 HTM securities were in a continuous unrealized loss position for 12 months or longer. The following table summarizes the amortized cost of HTM securities at June 30, ~~2020~~2021 aggregated by credit quality indicator:


Credit Rating:	Credit Rating:	Corporate and other		State and municipal		Credit Rating:	Corporate and other		State and municipal
AAA	AAA	$	—	$	754,049	AAA	$	0	$	987,413
AA	AA	12,750		711,365		AA	17,750		546,072
A	A	—		116,594		A	0		20,331
BBB						BBB	0		65
Non-rated	Non-rated	19,878		108,357		Non-rated	19,824		5,083
Total	Total	$	32,628	$	1,690,365	Total	$	37,574	$	1,558,964

The majority of state and municipal securities had a rating of A or greater at June 30, ~~2020.~~2021. State and municipal securities consist mainly of securities issued by jurisdictions located in the state of New York and securities issued by other states. ~~The non-rated~~Non-rated state and municipal securities consist of general obligation securities and short-term bond anticipation notes and tax anticipation notes issued by municipalities in the state of New York.

A security is considered to be delinquent once it is 30 days past due under the terms of the agreement. There were no past due securities and there were no securities on non-accrual at June 30, ~~2020.~~2021.

Securities pledged for borrowings at the FHLB and other institutions, and securities pledged for municipal deposits and other purposes, were as follows for the periods presented below:

June 30, December 31,
2020 2019
AFS securities pledged for borrowings, at fair value $ 26,448 $ 22,678
AFS securities pledged for municipal deposits, at fair value 656,134 866,020
HTM securities pledged for borrowings, at amortized cost — 483
HTM securities pledged for municipal deposits, at amortized cost 1,062,061 1,432,909
Total securities pledged $ 1,744,643 $ 2,322,090


	June 30,		December 31,
	2021		2020
AFS securities pledged for borrowings, at fair value	$	25,802	$	27,101
AFS securities pledged for municipal deposits, at fair value	545,072		569,724


HTM securities pledged for municipal deposits, at amortized cost	1,384,217		1,221,964
Total securities pledged	$	1,955,091	$	1,818,789

2215


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

~~(4)~~(3) Portfolio Loans

At and prior to December 31, 2019, portfolio loans were accounted for under the incurred loss model. On January 1, 2020, portfolio loans began to be accounted for under the expected loss model. Accordingly, some of the information presented below is not comparable from period to period. See Note 1. “Basis of Financial Statement Presentation and Summary of Significant Accounting Policies - (e) Accounting Principle Change” for additional information.

The composition of our total portfolio loans, which excludes loans held for sale, was the following for the periods presented below:

June 30, 2020 December 31, 2019
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I $ 3,361,655 $ 2,355,031
Asset-based lending 856,020 1,082,618
Payroll finance 124,354 226,866
Warehouse lending 1,567,186 1,330,884
Factored receivables 158,509 223,638
Equipment financing 1,699,805 1,800,564
Public sector finance 1,399,215 1,213,118
Total C&I 9,166,744 8,232,719
Commercial mortgage:
Commercial real estate (“CRE”) 5,817,958 5,418,648
Multi-family 4,584,939 4,876,870
Acquisition, development and construction (“ADC”) 572,558 467,331
Total commercial mortgage 10,975,455 10,762,849
Total commercial 20,142,199 18,995,568
Residential mortgage 1,938,212 2,210,112
Consumer 214,856 234,532
Total portfolio loans 22,295,267 21,440,212
Allowance for credit losses (365,489) (106,238)
Total portfolio loans, net $ 21,929,778 $ 21,333,974


	June 30, 2021		December 31, 2020
Commercial:
Commercial & Industrial (“C&I”):
Traditional C&I	$	2,917,848	$	2,920,205
Asset-based lending	707,207		803,004
Payroll finance	158,424		159,237
Warehouse lending	1,229,588		1,953,677
Factored receivables	217,399		220,217
Equipment financing	1,381,308		1,531,109
Public sector finance	1,723,270		1,572,819
Total C&I	8,335,044		9,160,268
Commercial mortgage:
Commercial real estate (“CRE”)	5,861,542		5,831,990
Multi-family	4,281,615		4,406,660
Acquisition, development and construction (“ADC”)	690,224		642,943
Total commercial mortgage	10,833,381		10,881,593
Total commercial	19,168,425		20,041,861
Residential mortgage	1,389,294		1,616,641



Consumer	166,378		189,907
Total portfolio loans	20,724,097		21,848,409
ACL	(314,873)		(326,100)
Total portfolio loans, net	$	20,409,224	$	21,522,309

Portfolio loans are shown at amortized cost, which includes deferred fees, deferred costs and purchase accounting adjustments, which were ~~$35.8~~$5.8 million at June 30, ~~2020~~2021 and $~~79.6~~20.9 million at December 31, ~~2019.~~ 2020.

The balance of portfolio loans excludes accrued interest receivable. Accrued interest receivable was $68.3 million and $71.0 million at June 30, 2021 and December 31, 2020, respectively, and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. All interest accrued but not received on loans placed on non-accrual is reversed against interest income.

Included in traditional C&I loans at June 30, ~~2020, were $649.4~~2021, was $7.8 million of principal balance ofrelated to loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). The CARES Act authorized the SBA to temporarily guarantee loans under a new 7(a) loan program, the PPP. These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness. The loans we originated have a maturity of two years, an interest rate of 1.00% and loan payments are deferred for the initial six months. ~~The~~

In the three and six months ended June 30, 2021, we sold $122.5 million and $192.5 million of loans, respectively, largely comprised of commercial real estate loans, the majority of which were rated special mention and substandard. In connection with these sales, we charged-off against the ACL - loans ~~have been pledged as collateral on borrowings under~~ the ~~FRB Paycheck Protection Program Lending Facility. See Note 8. “Borrowings” for additional information.~~uncollectible portion, which amounted to $11.7 million and $17.6 million in the three and six months ended June 30, 2021, respectively.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Bank pledged residential mortgage and CRE loans of ~~$7.1~~$6.1 billion and ~~$7.7~~$6.5 billion, respectively, to the FHLB as collateral for certain borrowing arrangements. See Note 8.7. “Borrowings”.

2316


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

Portfolio loans:

An analysis of the aging of portfolio loans, segregated by loan type as of June 30, ~~2020,~~2021, is presented below:

June 30, 2020
Current 30-59
days
past due 60-89
days
past due 90+
days
past due Total
Traditional C&I $ 3,336,821 $ 652 $ 1,993 $ 22,189 $ 3,361,655
Asset-based lending 856,020 — — — 856,020
Payroll finance 123,773 — — 581 124,354
Warehouse lending 1,567,186 — — — 1,567,186
Factored receivables 152,189 — — 6,320 158,509
Equipment financing 1,617,315 31,701 12,792 37,997 1,699,805
Public sector finance 1,399,215 — — — 1,399,215
CRE 5,790,496 2,736 8,392 16,334 5,817,958
Multi-family 4,571,630 6,450 2,422 4,437 4,584,939
ADC 542,124 — — 30,434 572,558
Residential mortgage 1,864,055 14,521 5,581 54,055 1,938,212
Consumer 202,203 1,776 900 9,977 214,856
Total loans $ 22,023,027 $ 57,836 $ 32,080 $ 182,324 $ 22,295,267
Total TDRs included above $ 63,143 $ 723 $ 1,269 $ 10,669 $ 75,804
Non-performing loans:
Loans 90+ days past due and still accruing $ 272
Non-accrual loans 260,333
Total non-performing loans $ 260,605


	June 30, 2021
	Current		30-59 days past due		60-89 days past due		90+ days past due		Total
Traditional C&I	$	2,898,001	$	6,005	$	10,136	$	3,706	$	2,917,848
Asset-based lending	707,207		0		0		0		707,207
Payroll finance	158,424		0		0		0		158,424
Warehouse lending	1,229,588		0		0		0		1,229,588
Factored receivables	217,399		0		0		0		217,399
Equipment financing	1,371,266		847		143		9,052		1,381,308
Public sector finance	1,723,270		0		0		0		1,723,270
CRE	5,822,083		23,345		15,530		584		5,861,542
Multi-family	4,268,435		2,823		10,030		327		4,281,615
ADC	665,224		0		0		25,000		690,224
Residential mortgage	1,366,022		6,138		2,078		15,056		1,389,294
Consumer	155,669		1,155		584		8,970		166,378
Total loans	$	20,582,588	$	40,313	$	38,501	$	62,695	$	20,724,097
Total TDRs included above	$	50,212	$	0	$	0	$	2,327	$	52,539
Non-performing loans:
Loans 90+ days past due and still accruing									$	0
Non-accrual loans									173,319
Total non-performing loans									$	173,319

2417


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

The following table represents an analysis of the aging of portfolio loans, segregated by loan type as ~~of December 31, 2019:~~of:


		December 31, 2019																							December 31, 2020
		Current		30-59 days past due		60-89 days past due		90+ days past due		Non- accrual				Total			Current		30-59 days past due		60-89 days past due		90+ days past due		Total
Traditional C&I	Traditional C&I	$	2,324,737	$	961	$	2,075	$	110	$	27,148			$	2,355,031	Traditional C&I	$	2,905,964	$	1,215	$	6,054	$	6,972	$	2,920,205
Asset-based lending	Asset-based lending	1,077,652		—		—		—		4,966				1,082,618		Asset-based lending	803,004		0		0		0		803,004
Payroll finance	Payroll finance	217,470		—		—		—		9,396				226,866		Payroll finance	159,237		0		0		0		159,237
Warehouse lending	Warehouse lending	1,330,884		—		—		—		—				1,330,884		Warehouse lending	1,953,677		0		0		0		1,953,677
Factored receivables	Factored receivables	223,638		—		—		—		—				223,638		Factored receivables	220,217		0		0		0		220,217
Equipment financing	Equipment financing	1,739,772		15,678		12,064		—		33,050				1,800,564		Equipment financing	1,469,653		24,286		11,077		26,093		1,531,109
Public sector finance	Public sector finance	1,213,118		—		—		—		—				1,213,118		Public sector finance	1,572,819		0		0		0		1,572,819
CRE	CRE	5,391,483		762		190		—		26,213				5,418,648		CRE	5,794,115		13,591		17,421		6,863		5,831,990
Multi-family	Multi-family	4,872,379		1,078		13		—		3,400				4,876,870		Multi-family	4,393,950		11,578		811		321		4,406,660
ADC	ADC	466,826		71		—		—		434				467,331		ADC	612,943		0		0		30,000		642,943
Residential mortgage	Residential mortgage	2,129,840		17,904		93		—		62,275				2,210,112		Residential mortgage	1,590,068		7,444		3,426		15,703		1,616,641
Consumer	Consumer	220,372		1,988		3		—		12,169				234,532		Consumer	178,587		1,043		907		9,370		189,907
Total loans	Total loans	$	21,208,171	$	38,442	$	14,438	$	110	$	179,051			$	21,440,212	Total loans	$	21,654,234	$	59,157	$	39,696	$	95,322	$	21,848,409
Total TDRs included above	Total TDRs included above	$	49,260	$	547	$	—	$	—	$	25,849			$	75,656	Total TDRs included above	$	60,257	$	2,927	$	13,492	$	2,295	$	78,971
Non-performing loans:	Non-performing loans:															Non-performing loans:
Loans 90+ days past due and still accruing	Loans 90+ days past due and still accruing											$	110					Loans 90+ days past due and still accruing									$	170
Non-accrual loans	Non-accrual loans									179,051						Non-accrual loans									166,889
Total non-performing loans	Total non-performing loans									$	179,161					Total non-performing loans									$	167,059

The following table presents the amortized cost basis of collateral-dependent loans by loan type and collateral as of June 30, ~~2020:~~

Collateral type
Real estate Business assets Equipment Taxi medallions Total
Traditional C&I $ 450 $ 6,055 $ 3,920 $ 9,814 $ 20,239
Asset-based lending — 27,829 — — 27,829
Factored receivables — 6,320 — — 6,320
Equipment finance — — 11,846 — 11,846
CRE 42,831 — — — 42,831
Multi-family 11,318 — — — 11,318
ADC 30,434 — — — 30,434
Residential mortgage 7,318 — — — 7,318
Consumer 1,910 — — — 1,910
Total $ 94,261 $ 40,204 $ 15,766 $ 9,814 $ 160,045
2021:


	Collateral type
	Real estate		Business assets		Equipment		Taxi medallions		Total
Traditional C&I	$	400	$	24,596	$	3,123	$	2,976	$	31,095
Asset-based lending	0		11,051		0		0		11,051
Payroll finance	0		652		0		0		652

Equipment finance	0		0		9,928		0		9,928
CRE	55,408		0		0		0		55,408

ADC	25,000		0		0		0		25,000
Residential mortgage	3,539		0		0		0		3,539
Consumer	6,676		0		0		0		6,676
Total	$	91,023	$	36,299	$	13,051	$	2,976	$	143,349

~~There were no warehouse lending, payroll finance, or public sector finance loans that were collateral-dependent at June 30, 2020.~~ Collateral-dependent loans include all loans that were deemed TDRs at June 30, ~~2020.~~2021. In the table above, ~~$130.4~~$126.6 million of the total loans were on non-accrual at June 30, ~~2020.~~2021. Business assets that secure traditional C&I and asset-based lending loans generally include accounts receivable, inventory, machinery and equipment.

There were 0 warehouse lending, factored receivables, public sector finance or multi-family loans that were collateral-dependent at June 30, 2021.

2518


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

The following table presents the amortized cost basis of collateral-dependent loans by loan type and collateral as of December 31, 2020:


	Collateral type
	Real estate		Business assets		Equipment		Taxi medallions		Total
Traditional C&I	$	425	$	0	$	5,998	$	10,916	$	17,339
Asset-based lending	0		8,280		0		0		8,280
Payroll finance	0		2,300		0		0		2,300


Equipment finance	0		1,117		10,461		0		11,578

CRE	53,212		0		0		0		53,212
Multi-family	9,914		0		0		0		9,914
ADC	30,000		0		0		0		30,000
Residential mortgage	5,025		0		0		0		5,025
Consumer	7,384		0		0		0		7,384
Total	$	105,960	$	11,697	$	16,459	$	10,916	$	145,032

Collateral-dependent loans include all loans that were deemed TDRs at December 31, 2020. In the table above, $115.9 million of the total loans were on non-accrual at December 31, 2020. Business assets that secure traditional C&I and asset-based lending loans generally include accounts receivable, inventory, machinery and equipment. There were 0 warehouse lending, factored receivables or public sector finance loans that were collateral-dependent at December 31, 2020.

The following table provides additional information on our non-accrual loans and loans 90 days past ~~due at June 30, 2020:~~

June 30, 2020
Total Non-accrual Loans Non-accrual loans with no ACL Loans 90 days or more past due still accruing interest
Traditional C&I $ 27,962 $ 19,789 $ —
Asset-based lending 23,188 18,463 —
Payroll finance 882 — —
Factored receivables 6,320 — —
Equipment financing 53,083 11,845 —
CRE 37,394 25,149 —
Multi-family 9,884 3,529 —
ADC 30,434 30,434 —
Residential mortgage 60,308 6,463 272
Consumer 10,878 1,097 —
Total $ 260,333 $ 116,769 $ 272
due:


	June 30, 2021						December 31, 2020
	Total Non-accrual Loans		Non-accrual loans with no ACL		Loans 90 days or more past due still accruing interest		Total Non-accrual Loans		Non-accrual loans with no ACL		Loans 90 days or more past due still accruing interest
Traditional C&I	$	41,593	$	6,053	$	0	$	19,223	$	16,914	$	94
Asset-based lending	7,535		3,745		0		5,255		4,613		0
Payroll finance	652		652		0		2,300		2,300		0


Equipment financing	23,452		4,356		0		30,634		11,578		2

CRE	48,074		0		0		46,053		38,529		74
Multi-family	327		0		0		4,485		2,156		0
ADC	25,000		0		0		30,000		0		0
Residential mortgage	17,132		1,973		0		18,661		808		0
Consumer	9,554		775		0		10,278		875		0
Total	$	173,319	$	17,554	$	0	$	166,889	$	77,773	$	170

When the ultimate collectability of the total principal of a loan is in doubt and the loan is on non-accrual status, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the total principal of a loan is not in doubt and the loan is on non-accrual status, contractual interest is credited to interest income when received, under the cash basis method.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the recorded ~~investment~~carrying value of residential mortgage loans that were in the process of

foreclosure was ~~$38.2~~$2.9 million and ~~$38.0~~$3.2 million, respectively, which is included in the balance of non-accrual residential mortgage loans above.

~~The following table provides information on accrued interest receivable~~There were 0 warehouse lending, factored receivables or public sector finance loans that ~~was reversed against interest income for the three and six months ended~~were non-accrual or 90 days past due at June 30, ~~2020:~~2021 or December 31, 2020.

Interest reversed
For the three months ended For the six months ended
June 30, 2020 June 30, 2020
Traditional C&I $ 42 $ 49
Asset-based lending — 67
CRE 142 288
Multi-family 84 111
ADC — 297
Residential mortgage 99 179
Consumer — 7
Total interest reversed $ 367 $ 998

2619


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

The following table ~~sets forth loans evaluated~~provides information on accrued interest receivable that was reversed against interest income for ~~impairment by segment~~the three and ~~the allowance for loan losses evaluated by segment at December 31, 2019:~~six months ended June 30, 2021 and 2020:

Loans evaluated by segment Allowance evaluated by segment
Individually
evaluated for
impairment Collectively
evaluated for
impairment PCI loans Total
loans Individually
evaluated for
impairment Collectively
evaluated for
impairment Total allowance for loan losses
Traditional C&I $ 29,838 $ 2,320,256 $ 4,937 $ 2,355,031 $ — $ 15,951 $ 15,951
Asset-based lending 4,684 1,064,275 13,659 1,082,618 — 14,272 14,272
Payroll finance 9,396 217,470 — 226,866 — 2,064 2,064
Warehouse lending — 1,330,884 — 1,330,884 — 917 917
Factored receivables — 223,638 — 223,638 — 654 654
Equipment financing 4,971 1,794,036 1,557 1,800,564 — 16,723 16,723
Public sector finance — 1,213,118 — 1,213,118 — 1,967 1,967
CRE 39,882 5,358,023 20,743 5,418,648 — 27,965 27,965
Multi-family 11,159 4,860,246 5,465 4,876,870 — 11,440 11,440
ADC — 467,331 — 467,331 — 4,732 4,732
Residential mortgage 6,364 2,140,650 63,098 2,210,112 — 7,598 7,598
Consumer 2,731 224,986 6,815 234,532 — 1,955 1,955
Total portfolio loans $ 109,025 $ 21,214,913 $ 116,274 $ 21,440,212 $ — $ 106,238 $ 106,238

~~The following table presents loans individually evaluated for impairment, excluding PCI loans, by segment of loans at December 31, 2019:~~

December 31, 2019
Unpaid principal balance Recorded investment
Loans with no related allowance recorded:
Traditional C&I $ 39,595 $ 29,838
Asset-based lending 16,181 4,684
Payroll finance 9,396 9,396
Equipment financing 6,409 4,971
CRE 44,526 39,882
Multi-family 11,491 11,159
Residential mortgage 7,728 6,364
Consumer 2,928 2,731
Total $ 138,254 $ 109,025

Our policy generally requires a charge-off of the difference between the present value of the cash flows or the net value of the collateral securing the loan and our recorded investment. As a result, there were 0 impaired loans with an allowance recorded at December 31, 2019.


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020


Traditional C&I	$	2	$	42	$	38	$	49
Asset-based lending	0		0		0		67



Equipment financing	49		0		87		0

CRE	264		142		271		288
Multi-family	0		84		0		111
ADC	0		0		0		297
Residential mortgage	53		99		226		179
Consumer	12		0		31		7
Total interest reversed	$	380	$	367	$	653	$	998

Short-term Loan Deferrals

Under the CARES Act, financial institutions are permitted to not classify loan modifications that ~~were related to~~result from the impact of the COVID-19 ~~if:~~pandemic as TDR, provided:

•The modifications were made between March 1, 2020 and, as modified by the Consolidated Appropriations Act, the earlier of ~~December 31, 2020~~January 1, 2022, or 60 days after the end of the public health emergency, and


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

•The underlying loans were not more than 30 days past due as of December 31, 2019.

We implemented a loan modification program in accordance with the CARES Act to provide temporary relief to borrowers that meet the requirements. The program allows for deferral of payments for up to 90 days, which we may extend for an additional 90 days at our option. The deferred payments and accrued interest during the deferral period are due and payable on or before the maturity of the loan. At June 30, ~~2020,~~2021, we ~~granted~~have temporary deferrals to borrowers on ~~2,567~~175 loans with an outstanding balance of ~~$1.7 billion.~~$109.8 million. There ~~is $7.8~~was $6.3 million of accrued interest associated with these loans. Under the provisions of the CARES Act, none of these loans were considered ~~a troubled debt restructuring (“TDR”)~~TDR at June 30, ~~2020.~~2021. The table below reflects the balance of deferrals by ~~portfolio:~~principal:

Non-pass rated loans
Loan balance outstanding Deferral of principal and interest % Special mention Substandard
Commercial
C&I:
Traditional C&I $ 3,361,655 $ 212,878 6.3 % $ 129 $ 9,589
Asset-based lending 856,020 — — — —
Payroll finance 124,354 295 0.2 — —
Warehouse lending 1,567,186 — — — —
Factored receivables 158,509 — — — —
Equipment finance 1,699,805 236,207 13.9 10,820 7,203
Public sector finance 1,399,215 — — — —
Total C&I 9,166,744 449,380 4.9 10,949 16,792
Commercial mortgage:
Commercial real estate 5,817,958 749,318 12.9 3,575 29,792
Multi-family 4,584,939 197,758 4.3 7,789 122
ADC 572,558 17,353 3.0 — —
Total commercial mortgage 10,975,455 964,429 8.8 11,364 29,914
Total commercial 20,142,199 1,413,809 7.0 22,313 46,706
Residential 1,938,212 293,389 15.1 — 8,609
Consumer 214,856 19,320 9.0 — 671
Total Portfolio loans $ 22,295,267 $ 1,726,518 7.7 % $ 22,313 $ 55,986

~~TDRs~~

~~At June 30, 2020 and December 31, 2019, TDRs were $75.8 million and $75.7 million, respectively. ACL - loans o~~f $1.9 million at June 30, 2020 and an allowance for loan losses of $2.3 million at December 31, 2019 were related to TDRs. We did not have any outstanding commitments to lend additional amounts to customers with loans classified as TDRs as of June 30, 2020 or December 31, 2019.

The modification of the terms of loans that were subject to a TDR in the six months ended June 30, 2020 and June 30, 2019 consisted mainly of an extension of loan maturity date, converting a loan to interest only for a defined period of time, deferral of interest payments, waiver of certain covenants, or reducing collateral requirements or interest rates.

~~The following table presents loans by segment modified as TDRs that occurred during the first six months of 2020 and 2019:~~

June 30, 2020 June 30, 2019
Recorded investment Recorded investment
Number Pre-
modification Post-
modification Number Pre-
modification Post-
modification
Traditional C&I — $ — $ — 1 $ 5,026 $ 5,026
Asset-based lending 2 10,553 9,822 — — —
Equipment financing — — — 5 2,806 2,806
Residential mortgage — — — 3 1,274 1,274
Total TDRs 2 $ 10,553 $ 9,822 9 $ 9,106 $ 9,106

2820


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)


							Non-pass rated loans
	Loan balance outstanding		Deferral of principal and interest		%		Special mention		Substandard
Commercial
C&I:
Traditional C&I	$	2,917,848	$	0	0	%	$	0	$	0
Asset-based lending	707,207		0		0		0		0
Payroll finance	158,424		0		0		0		0
Warehouse lending	1,229,588		0		0		0		0
Factored receivables	217,399		0		0		0		0
Equipment finance	1,381,308		1,577		0.1		0		1,577
Public sector finance	1,723,270		0		0		0		0
Total C&I	8,335,044		1,577		0		0		1,577
Commercial mortgage:
Commercial real estate	5,861,542		47,738		0.8		0		47,738
Multi-family	4,281,615		5,166		0.1		3,636		1,530
ADC	690,224		0		0		0		0
Total commercial mortgage	10,833,381		52,904		0.5		3,636		49,268
Total commercial	19,168,425		54,481		0.3		3,636		50,845
Residential	1,389,294		51,881		3.7		0		354
Consumer	166,378		3,402		2.0		0		194
Total Portfolio loans	$	20,724,097	$	109,764	0.5	%	$	3,636	$	51,393

TDRs

At June 30, 2021 and December 31, 2020, TDRs were $52.5 million and $79.0 million, respectively. The decline was mainly due to the repayment of a $13.0 million CRE loan and approximately $11.1 million of loans included in our second quarter loan sale. Of the total ACL - loans,$5.2 million at June 30, 2021 and $915 thousand at December 31, 2020 was related to TDRs. The increase in the ACL - loans related to TDRs was based on updates to our expected lifetime losses for these loans. We did not have any outstanding commitments to lend additional amounts to customers with loans classified as TDRs as of June 30, 2021 or December 31, 2020.

There was 1 equipment financing loan that was classified as TDR in the six months ended June 30, 2021. This loan was formerly included in our CARES Act modifications, however, after two modifications, the borrower requested an additional modification, and we concluded the loan should be considered a TDR. We charged-off the loan balance to the estimated collateral value based on our assessment of the borrower’s ability to service the debt.

The following table presents loans classified as TDRs during the first six months of 2021 and 2020 broken down by segment:


	June 30, 2021					June 30, 2020
		Recorded investment					Recorded investment
	Number	Pre- modification		Post- modification		Number	Pre- modification		Post- modification

Asset-based lending	0	$	0	$	0	2	$	10,553	$	9,822



Equipment financing	1	2,465		1,428		0	0		0





Total TDRs	1	$	2,465	$	1,428	2	$	10,553	$	9,822

During the six months ended June 30, 2021, 1 residential mortgage TDR loan, which totaled $490 thousand, experienced payment defaults within the twelve months following the modification. During the six months ended June 30, 2020, there were 2 equipment finance loans, 2 CRE loans, 2 residential ~~mortgage loans~~loan and 2 consumer loans that were designated ~~as a~~ TDR ~~that experienced payment defaults within the twelve months following the modification,~~and which totaled $16.9 ~~million. During the six months ended June 30, 2019, except for certain TDRs that are included in non-accrual loans, there were 0 TDRs that~~million and experienced a payment default within ~~the twelve~~12 months following athe modification. A payment default is defined as missing three


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

consecutive monthly payments or being over 90 days past due on a scheduled payment. TDRs are formal loan modifications which consist mainly of an extension of the loan maturity date, converting a loan to interest only for some defined period of time, deferral of interest payments, waiver of certain covenants, or reducing collateral requirements or interest rates. ~~TDRs during the periods presented above did not significantly impact the determination of the ACL - loans.~~

~~TDRs that subsequently defaulted described above increased the ACL b~~y ~~$3.9 million~~and resulted in charge-offs of $4.3 million during the six months ended June 30, 2020. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

~~(5) Allowance for Credit Losses~~(4) ACL - Loans

Activity in our ACL - loans for the three months ended June 30, 2021 and June 30, 2020 is summarized in the table below:

For the three months ended June 30, 2020
Beginning
balance Charge-offs Recoveries Net
charge-offs Provision / (credit) Ending balance
Traditional C&I $ 35,289 $ (3,988) $ 116 $ (3,872) $ 13,097 $ 44,514
Asset-based lending 26,490 (1,500) — (1,500) 5,863 30,853
Payroll finance 3,730 (560) 1 (559) (1,240) 1,931
Warehouse lending 289 — — — 379 668
Factored receivables 9,194 (3,731) 1 (3,730) 5,122 10,586
Equipment financing 60,028 (7,863) 387 (7,476) 25,620 78,172
Public sector finance 1,929 — — — 1,836 3,765
CRE 97,586 (11) 584 573 746 98,905
Multi-family 49,097 (154) 1 (153) (12,292) 36,652
ADC 15,204 (1) — (1) 2,992 18,195
Residential mortgage 23,090 (702) — (702) 11,567 33,955
Consumer 4,518 (172) 31 (141) 2,916 7,293
Total ACL - loans $ 326,444 $ (18,682) $ 1,121 $ (17,561) $ 56,606 $ 365,489
Annualized net charge-offs to average loans outstanding: 0.32 %


	For the three months ended June 30, 2021
	Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)			Ending balance
Traditional C&I	$	46,393	$	(1,148)	$	588	$	(560)	$	1,661		$	47,494
Asset-based lending	11,165		0		1,998		1,998		(2,689)			10,474
Payroll finance	1,519		(86)		4		(82)		130			1,567
Warehouse lending	1,232		0		0		0		(145)			1,087
Factored receivables	3,237		(761)		52		(709)		497			3,025
Equipment financing	28,025		(3,004)		719		(2,285)		2,247			27,987
Public sector finance	4,632		0		0		0		1,536			6,168
CRE	159,422		(7,375)		97		(7,278)		3,445			155,589
Multi-family	33,376		(4,982)		15		(4,967)		3,645			32,054
ADC	13,803		0		0		0		(2,432)			11,371
Residential mortgage	15,970		(237)		0		(237)		(1,701)			14,032
Consumer	4,412		(231)		38		(193)		(194)			4,025
Total ACL - loans	$	323,186	$	(17,824)	$	3,511	$	(14,313)	$	6,000		$	314,873
Annualized net charge-offs to average loans outstanding:									0.28		%

~~The table below presents the allowance for loan losses roll forward for the three months ended June 30, 2019 under the former incurred loss methodology.~~


	For the three months ended June 30, 2020
	Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)			Ending balance
Traditional C&I	$	35,289	$	(3,988)	$	116	$	(3,872)	$	13,097		$	44,514
Asset-based lending	26,490		(1,500)		0		(1,500)		5,863			30,853
Payroll finance	3,730		(560)		1		(559)		(1,240)			1,931
Warehouse lending	289		0		0		0		379			668
Factored receivables	9,194		(3,731)		1		(3,730)		5,122			10,586
Equipment financing	60,028		(7,863)		387		(7,476)		25,620			78,172
Public sector finance	1,929		0		0		0		1,836			3,765
CRE	97,586		(11)		584		573		746			98,905
Multi-family	49,097		(154)		1		(153)		(12,292)			36,652
ADC	15,204		(1)		0		(1)		2,992			18,195
Residential mortgage	23,090		(702)		0		(702)		11,567			33,955
Consumer	4,518		(172)		31		(141)		2,916			7,293
Total ACL - loans	$	326,444	$	(18,682)	$	1,121	$	(17,561)	$	56,606		$	365,489
Annualized net charge-offs to average loans outstanding:									0.32		%


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)


		For the three months ended June 30, 2019																								For the six months ended June 30, 2021
		Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision / (credit)		Ending balance			Beginning balance					Charge-offs		Recoveries		Net charge-offs		Provision/ (credit)		Ending balance
Traditional C&I	Traditional C&I	$	17,936	$	(754)	$	445	$	(309)	$	22	$	17,649	Traditional C&I	$	42,670				$	(2,175)	$	1,056	$	(1,119)	$	5,943	$	47,494
Asset-based lending	Asset-based lending	8,573		(3,551)		—		(3,551)		6,883		11,905		Asset-based lending	12,762					0		1,998		1,998		(4,286)		10,474
Payroll finance	Payroll finance	2,100		(84)		3		(81)		(628)		1,391		Payroll finance	1,957					(86)		6		(80)		(310)		1,567
Warehouse lending	Warehouse lending	693		—		—		—		150		843		Warehouse lending	1,724					0		0		0		(637)		1,087
Factored receivables	Factored receivables	1,092		(27)		4		(23)		88		1,157		Factored receivables	2,904					(765)		458		(307)		428		3,025
Equipment financing	Equipment financing	14,326		(1,335)		79		(1,256)		1,214		14,284		Equipment financing	31,794					(5,412)		1,573		(3,839)		32		27,987
Public sector finance	Public sector finance	1,134		—		—		—		460		1,594		Public sector finance	4,516					0		0		0		1,652		6,168
CRE	CRE	33,087		(238)		649		411		1,348		34,846		CRE	155,313					(10,308)		584		(9,724)		10,000		155,589
Multi-family	Multi-family	8,659		—		6		6		695		9,360		Multi-family	33,320					(8,212)		15		(8,197)		6,931		32,054
ADC	ADC	1,912		—		—		—		360		2,272		ADC	17,927					(5,000)		0		(5,000)		(1,556)		11,371
Residential mortgage	Residential mortgage	6,925		(689)		1		(688)		872		7,109		Residential mortgage	16,529					(504)		37		(467)		(2,030)		14,032
Consumer	Consumer	2,523		(467)		162		(305)		36		2,254		Consumer	4,684					(622)		130		(492)		(167)		4,025
Total allowance for loan losses		$	98,960	$	(7,145)	$	1,349	$	(5,796)	$	11,500	$	104,664
Total ACL - loans														Total ACL - loans	$	326,100				$	(33,084)	$	5,857	$	(27,227)	$	16,000	$	314,873
Annualized net charge-offs to average loans outstanding:	Annualized net charge-offs to average loans outstanding:																0.12	%	Annualized net charge-offs to average loans outstanding:											0.26	%

The table below presents the allowance for credit losses roll forward for the six months ended June 30, 2020. The CECL Day 1 column presents adjustments recorded through retained earnings to adopt the CECL standard and the increase to ACL - loans associated with purchase accounting marks on loans that were classified as PCI at December 31, 2019.

For the six months ended June 30, 2020
Beginning
balance CECL Day 1 Charge-offs Recoveries Net
charge-offs Provision/ (credit) Ending balance
Traditional C&I $ 15,951 $ 5,325 $ (4,286) $ 591 $ (3,695) $ 26,933 $ 44,514
Asset-based lending 14,272 11,973 (2,485) — (2,485) 7,093 30,853
Payroll finance 2,064 1,334 (560) 10 (550) (917) 1,931
Warehouse lending 917 (362) — — — 113 668
Factored receivables 654 795 (3,738) 5 (3,733) 12,870 10,586
Equipment financing 16,723 33,000 (12,656) 1,492 (11,164) 39,613 78,172
Public sector finance 1,967 (766) — — — 2,564 3,765
CRE 27,965 8,037 (1,286) 644 (642) 63,545 98,905
Multi-family 11,440 14,906 (154) 1 (153) 10,459 36,652
ADC 4,732 (119) (4) 105 101 13,481 18,195
Residential mortgage 7,598 14,104 (1,774) — (1,774) 14,027 33,955
Consumer 1,955 2,357 (1,577) 1,156 (421) 3,402 7,293
Total ACL - loans $ 106,238 $ 90,584 $ (28,520) $ 4,004 $ (24,516) $ 193,183 $ 365,489
Annualized net charge-offs to average loans outstanding: 0.24 %


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

On January 1, 2020, we adopted CECL, which replaced the incurred loss method we used in prior periods for determining the provision for credit losses and the ACL. Under CECL, we record at the inception of the loan an expected loss of all cash flows we do not expect to collect over the life of the loan. The adoption of CECL resulted in an increase in our ACL of $90.6 million, which did not impact our consolidated income statement. We recorded provision for credit losses of $193.2 million for the six months ended June 30, 2020.

~~The table below presents the allowance for loan losses roll forward for the six months ended June 30, 2019 under the former incurred loss methodology.~~


On January 1, 2020, we adopted CECL, which replaced the incurred loss method we used in prior periods for determining the provision for credit losses and the ACL. Under CECL, we record at the inception of the loan an expected loss of all cash flows we do not expect to collect over the life of the loan. The adoption of CECL on January 1, 2020, resulted in an increase in our ACL of $90.6 million, which did not impact our consolidated income statements.														On January 1, 2020, we adopted CECL, which replaced the incurred loss method we used in prior periods for determining the provision for credit losses and the ACL. Under CECL, we record at the inception of the loan an expected loss of all cash flows we do not expect to collect over the life of the loan. The adoption of CECL on January 1, 2020, resulted in an increase in our ACL of $90.6 million, which did not impact our consolidated income statements.
		For the six months ended June 30, 2019																								For the six months ended June 30, 2020
		Beginning balance		Charge-offs		Recoveries		Net charge-offs		Provision/ (credit)		Ending balance			Beginning balance			CECL Day 1		Charge-offs		Recoveries		Net charge-offs		Provision/ (credit)		Ending balance
Traditional C&I	Traditional C&I	$	14,201	$	(5,593)	$	584	$	(5,009)	$	8,457	$	17,649	Traditional C&I	$	15,951		$	5,325	$	(4,286)	$	591	$	(3,695)	$	26,933	$	44,514
Asset-based lending	Asset-based lending	7,979		(3,551)		—		(3,551)		7,477		11,905		Asset-based lending	14,272			11,973		(2,485)		0		(2,485)		7,093		30,853
Payroll finance	Payroll finance	2,738		(84)		4		(80)		(1,267)		1,391		Payroll finance	2,064			1,334		(560)		10		(550)		(917)		1,931
Warehouse lending	Warehouse lending	2,800		—		—		—		(1,957)		843		Warehouse lending	917			(362)		0		0		0		113		668
Factored receivables	Factored receivables	1,064		(59)		125		66		27		1,157		Factored receivables	654			795		(3,738)		5		(3,733)		12,870		10,586
Equipment financing	Equipment financing	12,450		(2,584)		210		(2,374)		4,208		14,284		Equipment financing	16,723			33,000		(12,656)		1,492		(11,164)		39,613		78,172
Public sector finance	Public sector finance	1,739		—		—		—		(145)		1,594		Public sector finance	1,967			(766)		0		0		0		2,564		3,765
CRE	CRE	32,285		(255)		658		403		2,158		34,846		CRE	27,965			8,037		(1,286)		644		(642)		63,545		98,905
Multi-family	Multi-family	8,355		—		109		109		896		9,360		Multi-family	11,440			14,906		(154)		1		(153)		10,459		36,652
ADC	ADC	1,769		—		—		—		503		2,272		ADC	4,732			(119)		(4)		105		101		13,481		18,195
Residential mortgage	Residential mortgage	7,454		(1,774)		2		(1,772)		1,427		7,109		Residential mortgage	7,598			14,104		(1,774)		0		(1,774)		14,027		33,955
Consumer	Consumer	2,843		(910)		405		(505)		(84)		2,254		Consumer	1,955			2,357		(1,577)		1,156		(421)		3,402		7,293
Total allowance for loan losses	Total allowance for loan losses	$	95,677	$	(14,810)	$	2,097	$	(12,713)	$	21,700	$	104,664	Total allowance for loan losses	$	106,238		$	90,584	$	(28,520)	$	4,004	$	(24,516)	$	193,183	$	365,489
Annualized net charge-offs to average loans outstanding:	Annualized net charge-offs to average loans outstanding:																0.13	%	Annualized net charge-offs to average loans outstanding:											0.24	%

Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of our loan portfolio, management tracks certain credit quality indicators, including trends related to: (i) the weighted-average risk grade of commercial loans; (ii) the level of classified commercial loans; (iii) the delinquency status of residential mortgage and consumer loans, including home equity lines of credit (“HELOC”) and other consumer loans; (iv) net charge-offs; (v) non-performing loans (see details above); and (vi) the general economic conditions in the ~~greater~~ New York ~~metropolitan region.~~Metro Market. We analyze loans individually by classifying the loans by credit risk, except residential mortgage loans, HELOC and other consumer loans, which are evaluated on a homogeneous pool basis unless the loan balance is greater than $750 thousand. This analysis is performed at least quarterly on all graded 7-Special Mention and lower loans. We use the following definitions of risk ratings:


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

1 and 2 - These grades include loans that are secured by cash, marketable securities or cash surrender value of life insurance policies.

3 - This grade includes loans to borrowers with strong earnings and cash flow that have the ability to service debt. The borrower’s assets and liabilities are generally well-matched and are above average quality. The borrower has ready access to multiple sources of funding, including alternatives such as term loans, private equity placements or trade credit.

4 - This grade includes loans to borrowers with above average cash flow, adequate earnings and debt service coverage ratios. The borrower generates discretionary cash flow, assets and liabilities are reasonably matched, and the borrower has access to other sources of debt funding or additional trade credit at market rates.

5 - This grade includes loans to borrowers with adequate earnings and cash flow and reasonable debt service coverage ratios. Overall leverage is acceptable and there is average reliance upon trade credit. Management has a reasonable amount of experience and depth, and owners are willing to invest available outside capital, as necessary.

6 - This grade includes loans to borrowers where there is evidence of some strain, earnings are inconsistent and volatile, and the borrowers’ outlook is uncertain. Generally, such borrowers have higher leverage than those with a better risk rating. These borrowers typically have limited access to alternative sources of bank debt and may be dependent upon debt funding for working capital support.


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

7 - Special Mention (OCC definition) - Other Assets Especially Mentioned are loans that have potential weaknesses which may, if not reversed or corrected, weaken the asset or inadequately protect the Bank’s credit position at some future date. Such assets constitute an undue and unwarranted credit risk but not to the point of justifying a classification of “Substandard.” The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances surrounding a specific asset.

8 - Substandard (OCC definition) - These loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some losses if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

9 - Doubtful (OCC definition) - These loans have all the weakness inherent in one classified as “Substandard” with the added characteristics that the weakness makes collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but, because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger, acquisition, liquidating procedures, capital injection, perfecting liens or additional collateral and refinancing plans.

10 - Loss (OCC definition) - These loans are charged-off because they are determined to be uncollectible and unbankable assets. This classification does not indicate that the asset has no absolute recovery or salvage value, but rather it is not practical or desirable to defer writing-off this asset even though partial recovery may be ~~effected~~affected in the future. Losses should be taken in the period in which they are determined to be uncollectible.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

Loans that are risk-rated 1 through 6 as defined above are considered to be pass-rated loans. As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the risk category of non-pass rated loans by segment was as follows:

June 30, 2020 December 31, 2019
Special Mention Substandard Special Mention Substandard
Traditional C&I $ 4,185 $ 40,007 $ 8,403 $ 39,470
Asset-based lending 46,437 77,519 78,445 24,508
Payroll finance 124 882 437 17,156
Factored receivables — 6,492 — —
Equipment financing 16,543 77,127 25,897 42,503
CRE 54,050 87,931 26,363 79,992
Multi-family 17,576 23,680 18,463 16,247
ADC 1,855 30,434 1,855 505
Residential mortgage 993 60,866 93 62,771
Consumer 42 10,979 20 12,276
Total $ 141,805 $ 415,917 $ 159,976 $ 295,428


	June 30, 2021				December 31, 2020
	Special Mention		Substandard		Special Mention		Substandard
Traditional C&I	$	45,368	$	114,777	$	24,162	$	84,792
Asset-based lending	61,631		11,051		111,597		11,669
Payroll finance	0		652		0		2,300

Factored receivables	0		0		5,523		0
Equipment financing	22,993		43,797		7,737		45,018

CRE	159,425		333,377		249,403		280,796
Multi-family	97,086		56,095		61,146		44,872
ADC	2,023		25,000		1,407		30,000
Residential mortgage	0		17,416		468		18,942
Consumer	9		9,640		15		10,371
Total	$	388,535	$	611,805	$	461,458	$	528,760

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020 there were 0 warehouse lending or public sector finance loans rated special mention or substandard.

At June 30, 2021, there were $4.6 million of traditional C&I loans rated doubtful orand 0 loans rated loss. At December 31, 2020, there were $304 thousand of traditional C&I loans rated doubtful and 0 loans rated loss.

3225


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purposes of the table below. At June 30, ~~2020,~~2021, our loans based on year of origination and risk designation isare as follows:


	Term loans amortized cost basis by origination year														Revolving loans converted to term
	2021		2020		2019		2018		2017		Prior		Revolving loans				Total
Traditional C&I
Pass	$	91,836	$	252,798	$	169,916	$	215,953	$	109,019	$	149,792	$	1,763,789	$	0	$	2,753,103
Special mention	7,808		0		14,282		16,952		3,233		1,237		1,856		0		45,368
Substandard	2,352		27,064		39,379		9,388		5,573		6,505		24,516		0		114,777
Doubtful	0		0		0		0		0		0		4,600		0		4,600
Total traditional C&I	101,996		279,862		223,577		242,293		117,825		157,534		1,794,761		0		2,917,848
Asset-based lending
Pass	17,716		12,472		7,314		2,393		7,119		34,162		553,349		0		634,525
Special mention	0		6,000		430		2,253		0		0		52,948		0		61,631
Substandard	0		—		0		0		0		0		11,051		0		11,051
Total asset-based lending	17,716		18,472		7,744		4,646		7,119		34,162		617,348		0		707,207
Payroll finance
Pass	0		0		0		3,398		0		0		154,374		0		157,772

Substandard	0		0		0		0		0		0		652		0		652
Total payroll finance	0		0		0		3,398		0		0		155,026		0		158,424
Warehouse lending
Pass	29,795		92,352		29,427		28,274		158,681		891,059		0		0		1,229,588


Total warehouse lending	29,795		92,352		29,427		28,274		158,681		891,059		0		0		1,229,588
Factored receivables
Pass	0		0		0		0		0		0		217,399		0		217,399


Total factored receivables	0		0		0		0		0		0		217,399		0		217,399
Equipment financing
Pass	128,331		360,648		450,558		194,832		78,053		101,955		141		0		1,314,518
Special mention	0		1,919		5,554		12,284		3,201		35		0		0		22,993
Substandard	0		5,580		18,675		7,068		9,147		3,327		0		0		43,797
Total equipment financing	128,331		368,147		474,787		214,184		90,401		105,317		141		0		1,381,308
Public Sector Finance
Pass	214,019		426,185		394,939		203,317		257,317		227,493		0		0		1,723,270


Total public sector finance	214,019		426,185		394,939		203,317		257,317		227,493		0		0		1,723,270

Term loans amortized cost basis by origination year Revolving loans converted to term
2020 2019 2018 2017 2016 Prior Revolving loans Total
Traditional C&I
Pass $ 791,022 $ 357,254 $ 339,243 $ 164,754 $ 96,846 $ 139,804 $ 1,428,540 $ — $ 3,317,463
Special mention — 549 325 1,958 54 359 940 — 4,185
Substandard 1 2,082 6,470 4,468 — 11,229 15,757 — 40,007
Total traditional C&I 791,023 359,885 346,038 171,180 96,900 151,392 1,445,237 — 3,361,655
Asset-Based Loans
Pass 9,488 6,728 4,076 36,756 43,478 17,862 613,676 — 732,064
Special mention 8,500 509 103 — — — 37,325 — 46,437
Substandard — — — — 1,361 2,817 73,341 — 77,519
Total asset-based lending 17,988 7,237 4,179 36,756 44,839 20,679 724,342 — 856,020
Payroll Finance
Pass — — 12,802 — — — 110,546 — 123,348
Special mention — — — — — — 124 — 124
Substandard — — — — — — 882 — 882
Total payroll finance — — 12,802 — — — 111,552 — 124,354
Warehouse Lending
Pass 79,326 82,945 210,143 126,595 550,196 517,981 — — 1,567,186
Special mention — — — — — — — — —
Substandard — — — — — — — — —
Total warehouse lending 79,326 82,945 210,143 126,595 550,196 517,981 — — 1,567,186
Factored Receivables
Pass — — — — — — 152,017 — 152,017
Special mention — — — — — — — — —
Substandard — — — — — — 6,492 — 6,492
Total factored receivables — — — — — — 158,509 — 158,509
Equipment Financing
Pass 281,836 652,159 331,923 170,821 104,970 64,426 — — 1,606,135
Special mention — 3,692 4,598 6,054 812 1,387 — — 16,543


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)


	Term loans amortized cost basis by origination year														Revolving loans converted to term
	2021		2020		2019		2018		2017		Prior		Revolving loans				Total
CRE
Pass	337,013		1,022,939		1,237,313		792,634		512,895		1,465,946		0		0		5,368,740
Special mention	0		5,342		36,331		33,984		36,681		47,087		0		0		159,425
Substandard	0		28,674		87,751		69,134		34,141		113,677		0		0		333,377
Total CRE	337,013		1,056,955		1,361,395		895,752		583,717		1,626,710		0		0		5,861,542
Multi-family
Pass	391,155		368,799		700,556		385,545		577,737		1,633,820		70,822		0		4,128,434
Special mention	0		4,872		23,869		5,358		11,405		51,582		0		0		97,086
Substandard	0		0		22,288		5,180		0		24,156		4,471		0		56,095
Total multi-family	391,155		373,671		746,713		396,083		589,142		1,709,558		75,293		0		4,281,615
ADC
Pass	104,700		148,463		261,293		73,668		27,601		47,476		0		0		663,201
Special mention	0		2,023		0		0		0		0		0		0		2,023
Substandard	0		0		0		0		25,000		0		0		0		25,000
Total ADC	104,700		150,486		261,293		73,668		52,601		47,476		0		0		690,224
Residential
Pass	2,753		10,803		11,234		31,165		34,198		1,281,725		0		0		1,371,878

Substandard	0		0		0		260		0		17,156		0		0		17,416
Total residential	2,753		10,803		11,234		31,425		34,198		1,298,881		0		0		1,389,294
Consumer
Pass	5		67		318		330		176		4,824		94,363		56,646		156,729
Special mention	0		0		0		0		0		9		0		0		9
Substandard	0		0		0		0		393		3,225		6,022		0		9,640
Total consumer	5		67		318		330		569		8,058		100,385		56,646		166,378
Total Loans	$	1,327,483	$	2,777,000	$	3,511,427	$	2,093,370	$	1,891,570	$	6,106,248	$	2,960,353	$	56,646	$	20,724,097


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

(5) Goodwill and Other Intangible Assets

The balance of goodwill and other intangible assets for the periods presented were as follows:


	June 30,		December 31,
	2021		2020
Goodwill	$	1,683,482	$	1,683,482
Other intangible assets:
Core deposits	$	62,552	$	69,808
Customer lists	2,960		3,256

Trade name	20,500		20,500

Total	$	86,012	$	93,564

The decrease in other intangible assets at June 30, 2021 compared to December 31, 2020 was due to amortization of intangibles.

The estimated aggregate future amortization expense for intangible assets remaining as of June 30, 2021 was as follows:


	Amortization expense
Remainder of 2021	$	7,552
2022	13,703
2023	12,322
2024	10,448
2025	8,722
2026	7,134
Thereafter	5,631
Total	$	65,512

(6) Deposits

Deposit balances at June 30, 2021 and December 31, 2020 were as follows:


	June 30,		December 31,
	2021		2020
Non-interest bearing demand	$	5,963,828	$	5,443,907
Interest bearing demand	4,706,781		4,960,800
Savings	2,653,678		2,603,570
Money market	8,388,671		8,114,415
Certificates of deposit	1,433,753		1,996,830
Total deposits	$	23,146,711	$	23,119,522

Total municipal deposits, which are included in the deposit balances above, were $1.8 billion and $1.6 billion at June 30, 2021 and December 31, 2020, respectively. See Note 2. “Securities” for the aggregate amount of securities that were pledged as collateral for municipal deposits and other purposes.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

Brokered deposits at June 30, 2021 and December 31, 2020 were as follows:


	June 30,		December 31,
	2021		2020
Interest bearing demand	$	16,839	$	433,790

Money market	494,614		1,045,478
Certificates of deposit	0		100,003
Total brokered deposits	$	511,453	$	1,579,271

In the second quarter of 2021, we concluded that one of our deposit relationships that was considered a brokered deposit at December 31, 2020 and March 31, 2021, and which totaled $520.9 million at June 30, 2021, now meets the “primary purpose” exception to the deposit broker definition. Accordingly, these deposits are included in core deposits at June 30, 2021 and we no longer report these deposits as brokered deposits.

(7) Borrowings

Our borrowings and weighted average interest rates were as follows for the periods presented:


	June 30,				December 31,
	2021				2020
	Amount		Rate		Amount		Rate
By type of borrowing:
FHLB borrowings	$	0	0	%	$	382,000	0.35	%

Repurchase agreements	25,802		0.10		27,101		0.10
Federal funds purchased	0		0		277,000		0.11

Subordinated Notes - Bank	0		0		143,703		5.45
Subordinated Notes - 2029	270,451		4.18		270,284		4.17
Subordinated Notes - 2030	221,768		4.06		221,626		4.06

Total borrowings	$	518,021	3.92	%	$	1,321,714	2.25	%
By remaining period to maturity:
Less than one year	$	25,802	0.10	%	$	686,101	0.24	%




Greater than five years	492,219		4.13		635,613		4.43
Total borrowings	$	518,021	3.92	%	$	1,321,714	2.25	%

FHLB borrowings. As a member of the FHLB, the Bank may borrow up to a discounted percentage of the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. As of June 30, 2021 and December 31, 2020, the Bank had total residential mortgage and CRE loans pledged after discount of $6.1 billion and $6.5 billion, respectively. In addition to the pledged mortgages, the Bank had also pledged securities to secure borrowings, which are disclosed in Note 2. “Securities.” As of June 30, 2021, the Bank had unused borrowing capacity at the FHLB of $6.0 billion and may increase such borrowing capacity by pledging securities not required to be pledged for other purposes with a collateral value of approximately $2.4 billion.

Subordinated Notes - Bank. On April 1, 2021, we redeemed the remaining balance of subordinated notes - Bank. Effective April 1, 2021, the eligibility of the subordinated notes - Bank as qualifying Tier 2 capital decreased by 20%. In anticipation of this redemption, in the fourth quarter of 2020, we contributed $175.0 million as equity capital into the Bank.

(8) Derivatives

To facilitate interest rate swap contracts with customers (all of which are considered over-the-counter or “OTC”), we have entered into corresponding “back-to-back” interest rate swap contracts both on the OTC, and on futures markets such as the Chicago Mercantile Exchange (“CME”) and London Clearing House (“LCH”). At June 30, 2021 and December 31, 2020, the OTC derivatives are included in our consolidated financial statements at the gross fair value amount of the asset (included in other assets) and liability (included in other liabilities), which incorporates the change in the fair value of the contract since inception. The CME legally characterizes variation margin payments (a payment made based on changes in the fair value of the interest rate swap contracts) as a settlement, referred to as a settled-to-market (“STM”) transaction. At June 30, 2021 and December 31, 2020, we posted cash collateral under STMs in the amounts


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

of $64.0 million and $89.8 million, respectively, for the net change in fair value of our CME and LCH interest rate swap contracts. The decrease was mainly due to changes in the fair value of the underlying interest rate swap contracts, which may change daily, positively or negatively, mainly due to changes in interest rates.

We do not typically require our commercial customers to post cash or securities as collateral on their swaps. However, our swap contracts incorporate certain standard terms contained in the International Swaps and Derivatives Association agreement and loan documents whereby, in the event of default, we are permitted to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability.

Summary information as of June 30, 2021 and December 31, 2020 regarding these derivatives is presented below:


	Notional amount		Average maturity (in years)	Weighted average fixed rate		Weighted average variable rate	Fair value
June 30, 2021
Included in other assets:
Third-party interest rate swap	$	0					$	0
Customer interest rate swap	1,836,282						107,361
Total	$	1,836,282	4.11	4.42	%	1 m Libor + 2.21%	$	107,361
Included in other liabilities:
Third-party interest rate swap	$	1,836,282					$	43,354
Customer interest rate swap	0						0
Total	$	1,836,282	4.11	4.42	%	1 m Libor + 2.21%	$	43,354
December 31, 2020
Included in other assets:
Third-party interest rate swap	$	0					$	0
Customer interest rate swap	1,913,607						149,797
Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	149,797
Included in other liabilities:
Third-party interest rate swap	$	1,913,607					$	60,004
Customer interest rate swap	0						0
Total	$	1,913,607	4.40	4.44	%	1 m Libor + 2.20%	$	60,004


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

(9) Income Taxes

Actual income tax expense differs from the tax computed based on pre-tax income and the applicable statutory federal tax rate for the

following reasons:


	For the three months ended						For the six months ended
	June 30,						June 30,
	2021			2020			2021			2020
Income before income tax expense	$	122,862		$	57,902		$	244,967		$	64,007
Tax at federal statutory rate of 21%	25,801			12,159			51,443			13,441
State and local income taxes, net of federal tax benefit	7,038			1,091			13,122			1,680
Tax exempt interest, net of disallowed interest	(5,800)			(7,493)			(11,577)			(14,902)
BOLI income	(1,043)			(1,034)			(2,047)			(2,145)

Low income housing tax credits and other benefits	(13,402)			(10,458)			(27,182)			(18,920)
Low income housing investment amortization expense	11,826			8,987			23,333			16,388
Tax rate adjustment benefit due to CARES Act net operating loss (“NOL”) carryback	0			0			0			(21,313)
Uncertain tax position reserve	0			0			0			11,480
Annual effective tax rate adjustment	0			3,862			0			12,110
Non-deductible compensation expense 1	421			0			1,061			0
Equity-based stock compensation (benefit) expense	(300)			287			(452)			778
FDIC insurance premium limitation	148			315			405			571
Other, net	(166)			(606)			(628)			(100)
Actual income tax expense (benefit)	$	24,523		$	7,110		$	47,478		$	(932)
Effective income tax rate	20.0		%	12.3		%	19.4		%	(1.5)		%

1 Includes $161 thousand in the three months ended June 30, 2021 and $678 thousand in the six months ended June 30, 2021 from the write-off of deferred tax assets related to the vesting of restricted stock that will not be deductible based on Section 162(m) limitations.

Net deferred tax liabilities were $30.3 million at June 30, 2021, compared to $43.3 million at December 31, 2020. The change was mainly due to the change in value of our available for sale securities in the first six months of 2021. NaN valuation allowance was recorded against any deferred tax assets as of those dates, based upon management’s evaluation of historical and anticipated future pre-tax income, and the reversal periods for the items resulting in deferred tax assets and liabilities.

As of June 30, 2021, the accrual for unrecognized gross tax benefits was as follows:


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Uncertain tax positions beginning of period	$	7,000	$	11,480	$	7,000	$	0
Additions for tax positions related to prior tax years	0		0		0		11,480
Decrease due to settlement	0		0		0		0
Interest expense in tax positions	0		123		0		123
Uncertain tax positions at end of period	$	7,000	$	11,603	$	7,000	$	11,603


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

Significant tax filings that remain open for examination include the following:

•Federal for tax years 2017 through present;

•New York State tax filings for tax years 2017 through present;

•New York City tax filings for tax years 2015 through present; and

•New Jersey State tax filings for tax years 2017 through present.

Generally speaking, we are no longer subject to examination by federal, state or local taxing authorities in respect of tax years prior to December 31, 2017.

Interest and/or penalties related to income taxes are reported as a component of other non-interest expense.

(10) Stock-Based Compensation

The following table summarizes the activity in our stock-based compensation plan for the six months ended June 30, 2021:


		Non-vested stock awards/stock units outstanding			Stock options outstanding
	Shares available for grant	Number of shares	Weighted average grant date fair value		Number of shares	Weighted average exercise price
Balance at January 1, 2021	1,811,418	2,993,643	$	19.54	336,621	$	11.14
Amended 2015 Omnibus Equity and Incentive Plan	3,500,000	—	—		—	—
Granted	(1,138,246)	1,138,246	20.36		0	0
Stock awards vested	0	(825,909)	21.31		0	0
Exercised	0	—	—		(240,405)	10.74
Forfeited	38,924	(38,924)	19.02		0	0
Canceled/expired	31,109	(31.109)	20.85		0	0
Balance at June 30, 2021	4,243,205	3,235,947	$	19.37	96,216	$	12.13
Exercisable at June 30, 2021					96,216	$	12.13

On May 26, 2021, our stockholders approved the Amended and Restated 2015 Omnibus Equity and Incentive Plan (the “Amended Omnibus Plan”). The Amended Omnibus Plan increased the shares available for issuance to 10,500,000 from 7,000,000. We intend that the additional shares under the Amended Omnibus Plan will be made available from authorized but unissued shares of our common stock or from treasury shares. Shares awarded will be removed from the share reserve as of the grant date, and cancellations and forfeitures will be added back to the share reserve. Each grant of a stock option, stock appreciation right or other award will be counted as one (1) share against this limit. Pursuant to our Merger Agreement with Webster, we are required to obtain the prior written consent of Webster before we grant any shares under the Amended Omnibus Plan.

The total intrinsic value of outstanding in-the-money stock options, was $1.2 million at June 30, 2021, all of which are exercisable.

We use an option pricing model to estimate the grant date fair value of stock options granted. There were 0 stock options granted during the six months ended June 30, 2021 or June 30, 2020. As a result, we incurred 0 stock option expense during the six month periods ended June 30, 2021 and 2020.

Stock-based compensation expense is recognized ratably over the requisite service period for all awards. Stock-based compensation expense associated with non-vested stock awards and the related income tax benefit, and proceeds from stock option exercises are


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

presented below:


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Stock options	$	0	$	0	$	0	$	0
Non-vested stock awards/performance units	6,781		5,913		13,398		11,919
Non-vested stock awards/performance units	$	6,781	$	5,913	$	13,398	$	11,919
Income tax benefit	1,322		739		2,613		1,490
Proceeds from stock option exercises	1,829		101		2,581		515

Unrecognized stock-based compensation expense as of June 30, 2021 was $41.4 million and is expected to be recognized over 1.72 years.

(11) Other Non-Interest Expense, Other Assets and Other Liabilities

(a) Other Non-Interest Expense

Other non-interest expense items for the three and six months ended June 30, 2021 and 2020, respectively, are presented in the following table:


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Other non-interest expense:

Depreciation expense on operating leases	$	2,917	$	3,136	$	6,042	$	6,628
Advertising and promotion	1,960		1,140		3,668		3,123
Communications	1,323		1,320		2,750		2,950
Residential mortgage loans servicing	1,303		1,247		2,752		2,624
Commercial loan servicing	1,254		1,293		2,233		2,318

Insurance & surety bond premium	1,044		1,158		1,958		2,248

Operational losses	601		609		1,194		1,215

Other	5,069		8,138		9,926		13,589
Total other non-interest expense	$	15,471	$	18,041	$	30,523	$	34,695

(b) Other Assets

Other assets are presented in the following table. Significant components of the aggregate of other assets are presented separately.


	June 30,		December 31,
	2021		2020
Other assets:
Low income housing tax credit investments	$	492,298	$	488,303
Right of use asset for operating leases	100,145		105,667
Fair value of swaps	107,361		149,797
Cash on deposit as swap collateral / net of settlement	62,513		82,478
Operating leases - equipment and vehicles leased to others	46,116		55,224
Other asset balances	194,770		181,934
Total other assets	$	1,003,203	$	1,063,403

Other asset items include current income tax balances, prepaid insurance, prepaid property taxes, prepaid maintenance, accounts receivable and other miscellaneous assets.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

Substandard — 29,091 20,729 16,044 6,004 5,259 — — 77,127
Total equipment financing 281,836 684,942 357,250 192,919 111,786 71,072 — — 1,699,805
Public Sector Finance
Pass 209,698 415,841 216,708 293,257 190,463 73,248 — — 1,399,215
Special mention — — — — — — — — —
Substandard — — — — — — — — —
Total public sector finance 209,698 415,841 216,708 293,257 190,463 73,248 — — 1,399,215
CRE
Pass 678,622 1,418,239 1,030,051 584,824 624,060 1,340,181 — — 5,675,977
Special mention 12,511 1,978 235 6,233 — 33,093 — — 54,050
Substandard — 12,795 119 2,541 5,352 67,124 — — 87,931
Total CRE 691,133 1,433,012 1,030,405 593,598 629,412 1,440,398 — — 5,817,958
Multi-family
Pass 209,599 748,377 443,927 668,214 684,963 1,712,543 76,060 — 4,543,683
Special mention — — — — — 17,576 — — 17,576
Substandard — — — — 1,392 22,288 — — 23,680
Total multi-family 209,599 748,377 443,927 668,214 686,355 1,752,407 76,060 — 4,584,939
ADC
Pass 97,404 201,566 124,599 68,402 27,054 21,244 — — 540,269
Special mention — — — 1,855 — — — — 1,855
Substandard — — — 30,000 — 434 — — 30,434
Total ADC 97,404 201,566 124,599 100,257 27,054 21,678 — — 572,558
Residential
Pass 2,749 13,183 55,398 54,196 134,572 1,616,255 — — 1,876,353
Special mention — — — — — 993 — — 993
Substandard — — — — 401 60,465 — — 60,866
Total residential 2,749 13,183 55,398 54,196 134,973 1,677,713 — — 1,938,212
Consumer
Pass 61 457 586 491 206 6,132 124,058 71,844 203,835
Special mention — — — — — — 42 — 42
Substandard — — — — — 404 3,138 7,437 10,979
Total consumer 61 457 586 491 206 6,536 127,238 79,281 214,856
Total Loans $ 2,380,817 $ 3,947,445 $ 2,802,035 $ 2,237,463 $ 2,472,184 $ 5,733,104 $ 2,642,938 $ 79,281 $ 22,295,267


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~(6) Goodwill and Other Intangible Assets~~

~~The balance of goodwill and other intangible assets for the periods presented were as follows:~~

June 30, December 31,
2020 2019
Goodwill $ 1,683,482 $ 1,683,482
Other intangible assets:
Core deposits $ 77,865 $ 85,922
Customer lists 3,599 3,942
Trade name 20,500 20,500
Total $ 101,964 $ 110,364

Impairment of goodwill and other intangible assets may exist when the carrying value of goodwill exceeds its fair value. During the quarter ended June 30, 2020, due to macroeconomic and other factors, we concluded a quantitative evaluation of goodwill was required to determine if it was more likely than not that goodwill and other intangible assets were impaired. If the carrying amount of the goodwill exceeds the fair value of goodwill, an impairment loss is recognized in an amount equal to that excess. We engaged an independent third-party to perform a quantitative goodwill impairment test. The third-party relied mainly on a discounted cash flow analysis to estimate fair value, which was approximately 10% greater than carrying value. If we deem our intangible assets to be impaired, in the future, a non-cash charge for the amount of such impairment would be recorded to earnings and would have no impact on tangible capital or our regulatory capital ratios.

~~The decrease in other intangible assets at June 30, 2020 compared to December 31, 2019 was due to amortization of intangibles.~~

~~The estimated aggregate future amortization expense for intangible assets remaining as of June 30, 2020 was as follows:~~

Amortization expense
Remainder of 2020 $ 8,400
2021 15,104
2022 13,703
2023 12,322
2024 10,448
2025 8,722
Thereafter 12,765
Total $ 81,464

~~(7) Deposits~~

~~Deposit balances at June 30, 2020 and December 31, 2019 were as follows:~~

June 30, December 31,
2020 2019
Non-interest bearing demand $ 5,407,728 $ 4,304,943
Interest bearing demand 4,636,702 4,427,012
Savings 2,669,982 2,652,764
Money market 8,252,091 7,585,888
Certificates of deposit 2,634,118 3,448,051
Total deposits $ 23,600,621 $ 22,418,658

Total municipal deposits, which are included in the deposit balances above, were $1.7 billion and $2.0 billion at June 30, 2020 and December 31, 2019, respectively. See Note 3. “Securities” for the aggregate amount of securities that were pledged as collateral for municipal deposits and other purposes.


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~Brokered deposits at June 30, 2020 and December 31, 2019 were as follows:~~

June 30, December 31,
2020 2019
Interest bearing demand $ 151,981 $ 149,566
Money market 1,171,910 944,627
Certificates of deposit 241,153 772,251
Total brokered deposits $ 1,565,044 $ 1,866,444

~~(8) Borrowings~~

~~Our borrowings and weighted average interest rates were as follows for the periods presented:~~

June 30, December 31,
2020 2019
Amount Rate Amount Rate
By type of borrowing:
FHLB borrowings $ 975,058 1.60 % $ 2,245,653 2.04 %
Paycheck Protection Program Liquidity Facility 568,350 0.35 — —
Repurchase agreements 26,448 1.15 22,678 1.20
3.50% Senior Notes — — 173,504 3.19
Subordinated Notes - Company 271,096 4.17 270,941 4.17
Subordinated Notes - Bank 173,307 5.45 173,182 5.45
Total borrowings $ 2,014,259 1.92 % $ 2,885,958 2.53 %
By remaining period to maturity:
Less than one year $ 651,506 1.51 % $ 1,491,446 2.19 %
One to two years 893,350 0.85 925,388 2.07
Two to three years 25,000 1.71 25,000 1.71
Greater than five years 444,403 4.67 444,124 4.67
Total borrowings $ 2,014,259 1.92 % $ 2,885,958 2.53 %

~~FHLB borrowings.~~ As a member of the FHLB, the Bank may borrow up to a discounted percentage of the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. As of June 30, 2020 and December 31, 2019, the Bank had total residential mortgage and CRE loans pledged after discount of $7.1 billion and $7.7 billion, respectively. In addition to the pledged mortgages, the Bank had also pledged securities to secure borrowings, which are disclosed in Note 3. “Securities.” As of June 30, 2020, the Bank had unused borrowing capacity at the FHLB of $5.9 billion and may increase such borrowing capacity by pledging securities not required to be pledged for other purposes with a collateral value of approximately $2.8 billion. In the six months ended June 30, 2020, the Bank redeemed $650.0 million of FHLB borrowings with a weighted average interest rate of 2.22% and incurred a loss of $10.5 million.

~~Paycheck Protection Program (“PPP”) Liquidity Facility.~~ As a participant in the SBA PPP, the Bank may pledge originated PPP loans as collateral at face value to the FRB of New York for term financings. As of June 30, 2020, the Bank has pledged PPP loans equal to the amount borrowed.

~~(9) Derivatives~~

We have entered into interest rate swap contracts that are both over-the-counter, or OTC, and those that are exchanged on futures markets such as the Chicago Mercantile Exchange (“CME”) and London Clearing House (“LCH”). At June 30, 2020 and December 31, 2019, the OTC derivatives are included in our consolidated financial statements at the gross fair value amount of the asset (included in other assets) and liability (included in other liabilities), which represents the change in the fair value of the contract since inception. The CME legally characterizes variation margin payments (a payment made based on changes in the fair value of the interest rate swap contracts) as a settlement, referred to as settled-to-market (“STM”). As a result, at June 30, 2020 and December 31, 2019, we posted cash collateral under STMs in the amounts of $105.2 million and $43.0 million, respectively, for the net fair value of our CME and LCH interest rate swap contracts with another financial institution. The increase was mainly due to an increase in swap contracts and changes


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~in the fair value of the underlying interest rate swap contracts, which may change daily, positively or negatively, mainly due to changes in interest rates.~~

We do not typically require our commercial customers to post cash or securities as collateral on our program of back-to-back swaps. However, certain language is written into the International Swaps and Derivatives Association agreement and loan documents where, in default situations, we are allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability.

~~Summary information as of June 30, 2020 and December 31, 2019 regarding these derivatives is presented below:~~

Notional
amount Average
maturity (in years) Weighted
average
fixed rate Weighted
average
variable rate Fair value
June 30, 2020
Included in other assets:
Third-party interest rate swap $ — $ —
Customer interest rate swap 1,959,329 174,553
Total $ 1,959,329 4.83 4.43 % 1 m Libor + 2.19% $ 174,553
Included in other liabilities:
Third-party interest rate swap $ 1,959,329 $ 69,344
Customer interest rate swap — —
Total $ 1,959,329 4.83 4.43 % 1 m Libor + 2.19% $ 69,344
December 31, 2019
Included in other assets:
Third-party interest rate swap $ 116,874 $ 15
Customer interest rate swap 1,738,675 67,303
Total $ 1,855,549 5.18 4.50 % 1 m Libor + 2.23% $ 67,318
Included in other liabilities:
Third-party interest rate swap $ 1,738,675 $ 23,998
Customer interest rate swap 116,874 316
Total $ 1,855,549 5.18 4.50 % 1 m Libor + 2.23% $ 24,314


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~(10) Income Taxes~~

~~Actual income tax expense differs from the tax computed based on pre-tax income and the applicable statutory federal tax rate for the~~

~~following reasons:~~

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
Income before income tax expense $ 57,902 $ 120,457 $ 64,007 $ 250,368
Tax at federal statutory rate of 21% 12,159 25,296 13,441 52,577
State and local income taxes, net of federal tax benefit 1,091 6,188 1,680 12,878
Tax exempt interest, net of disallowed interest (7,493) (5,303) (14,902) (10,556)
BOLI income (1,034) (893) (2,145) (1,662)
Low income housing tax credits and other benefits (10,458) (4,814) (18,920) (9,161)
Low income housing investment amortization expense 8,987 4,073 16,388 7,883
Tax rate adjustment benefit due to CARES Act NOL carryback — — (21,313) —
Uncertain tax position reserve — — 11,480 —
Annual effective tax rate adjustment 3,862 — 12,110 —
Equity-based stock compensation benefit 287 — 778 (106)
FDIC insurance premium limitation 315 224 571 478
Other, net (606) (774) (100) 140
Actual income tax expense (benefit) $ 7,110 $ 23,997 $ (932) $ 52,471
Effective income tax rate 12.3 % 19.9 % (1.5) % 21.0 %

Net deferred tax liabilities were $56.1 million at June 30, 2020, compared to $67.6 million at December 31, 2019. The change was mainly due to provision for credit loss expense recorded under CECL, which was offset by the removal of the deferred tax asset for the federal net operating loss which is being carried back under the provisions of the CARES Act. NaN valuation allowance was recorded against any deferred tax assets as of those dates, based upon management’s consideration of historical and anticipated future pre-tax income, and the reversal periods for the items resulting in deferred tax assets and liabilities.

~~As of June 30, 2020, the accrual for unrecognized gross tax benefits was as follows:~~

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
Uncertain tax positions beginning of period $ 11,480 $ — $ — $ —
Additions for tax positions related to prior tax years — — 11,480 —
Interest expense in tax positions 123 — 123 —
Uncertain tax positions at June 30, 2020 $ 11,603 $ — $ 11,603 $ —

~~Significant tax filings that remain open for examination include the following:~~

•~~Federal for tax years 2016 through present;~~

•~~New York State tax filings for tax years 2015 through present;~~

•~~New York City tax filings for tax years 2015 through present; and~~

•~~New Jersey State tax filings for tax years 2016 through present.~~

~~We are generally no longer subject to examination by federal, state or local taxing authorities for tax years prior to December 31, 2015.~~

~~Interest and/or penalties related to income taxes are reported as a component of other non-interest expense.~~


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~(11) Stock-Based Compensation~~

~~The following table summarizes the activity in our stock-based compensation plan for the six months ended June 30, 2020:~~

Non-vested stock awards/stock units outstanding Stock options outstanding
Shares available for grant Number of shares Weighted average grant date fair value Number of shares Weighted average exercise price
Balance at January 1, 2020 3,347,036 2,187,197 $ 20.96 427,274 $ 11.15
Granted (1,184,289) 1,184,289 20.60 — —
Stock awards vested ⁽¹⁾
(39,504) (610,011) 21.83 — —
Exercised — — — (51,000) 10.09
Forfeited 151,158 (121,005) 20.62 (30,153) 13.43
Canceled/expired (30,153) — — — 13.43
Balance at June 30, 2020 2,244,248 2,640,470 $ 20.61 346,121 $ 11.11
Exercisable at June 30, 2020 346,121 $ 11.11

⁽¹⁾~~The 39,504 shares vested represents performance shares that were granted in February 2017 to certain executives with a~~ ~~three~~-year measurement period. These shares vested in the first quarter of 2020 at 150.0% of the target amount granted, which resulted in these additional shares being awarded and additional expense of $960 thousand which was recorded in the first quarter of 2020.

~~The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money exercisable stock options was $398 thousand at June 30, 2020.~~

We use an option pricing model to estimate the grant date fair value of stock options granted. There were 0 stock options granted during the six months ended June 30, 2020 or June 30, 2019. We incurred 0 stock option expense during the three and six month periods ended June 30, 2020 and 2019.

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
Non-vested stock awards/performance units $ 5,913 $ 4,605 $ 11,919 $ 9,728
Income tax benefit $ 739 $ 967 $ 1,490 $ 2,043
Proceeds from stock option exercises $ 101 $ 2,268 $ 515 $ 1,889

~~Unrecognized stock-based compensation expense as of June 30, 2020 was as follows:~~


	~~June 30, 2020~~
~~Stock options~~	$	—
~~Non-vested stock awards/performance units~~	~~38,979~~
~~Total~~	$	~~38,979~~

~~The weighted average period over which unrecognized non-vested stock awards/performance units expense is expected to be recognized is 1.94 years.~~


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~(12) Other Non-Interest Expense, Other Assets and~~(c) Other Liabilities

~~(a) Other Non-Interest Expense~~

~~Other non-interest expense items for the six months ended June 30, 2020 and 2019, respectively, are presented in the following table:~~

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
Other non-interest expense:
Professional fees $ 5,458 $ 6,380 $ 11,207 $ 10,528
Depreciation expense on operating leases 3,136 — 6,628 —
Advertising and promotion 1,140 1,384 3,123 2,375
Communications 1,320 1,710 2,950 3,604
Residential mortgage loans servicing 1,247 1,383 2,624 2,991
Insurance & surety bond premium 1,158 1,006 2,248 2,068
Operational losses 609 1,907 1,215 2,490
Loss on prepayment of FHLB borrowings 9,723 — 10,476 —
Other 9,431 6,304 15,907 12,962
Total other non-interest expense $ 33,222 $ 20,074 $ 56,378 $ 37,018

~~(b) Other Assets~~

~~Other assets are presented in the following table. Significant components of the aggregate of other assets are presented separately.~~

June 30, December 31,
2020 2019
Other assets:
Low income housing tax credit investments $ 399,336 $ 386,824
Right of use asset for operating leases (see Note 15) 102,379 112,226
Fair value of swaps (see Note 9) 174,553 67,318
Cash on deposit as swap collateral / net of settlement 95,510 93,606
Operating leases - equipment and vehicles leased to others 61,497 72,291
Other asset balances 225,386 108,603
Total other assets $ 1,058,661 $ 840,868

Other asset items include cash on deposit as collateral for swaps, current income tax balances, prepaid insurance, prepaid property taxes, prepaid maintenance, accounts receivable and other miscellaneous assets.

~~(c) Other Liabilities~~

Other liabilities are presented in the following table. Significant components of the aggregate of other liabilities are presented separately.


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

June 30, December 31,
2020 2019
Other liabilities:
Commitment to fund low income housing tax credit investments $ 228,972 $ 264,930
Lease liability (see Note 15) 109,674 118,986
Payroll finance and factoring liabilities 92,659 105,972
Swap liabilities (see Note 9) 69,344 24,314
Other liability balances 170,491 179,250
Total other liabilities $ 671,140 $ 693,452


	June 30,		December 31,
	2021		2020
Other liabilities:
Commitment to fund low income housing tax credit investments	$	259,405	$	283,849
Lease liability	106,070		113,405
Payroll finance and factoring liabilities	143,153		115,802
Swap liabilities (see Note 8)	43,354		60,004
Other liability balances	137,827		155,642
Total other liabilities	$	689,809	$	728,702

Other liability balances include deferred taxes, accrued interest payable, accounts payable, accrued liabilities mainly for compensation and benefit plans and other miscellaneous liabilities.

~~(13)~~(12) Earnings Per Common Share

The following is a summary of the calculation of earnings per common share (“EPS”):


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income available to common stockholders	$	96,380	$	48,820	$	193,567	$	60,991
Weighted average common shares outstanding for computation of basic EPS	191,436,885		193,479,757		191,655,897		194,909,498
Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants(1)	856,104		124,674		800,920		259,059
Weighted average common shares for computation of diluted EPS	192,292,989		193,604,431		192,456,817		195,168,557
EPS(2):
Basic	$	0.50	$	0.25	$	1.01	$	0.31
Diluted	0.50		0.25		1.01		0.31

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
Net income available to common stockholders $ 48,820 $ 94,473 $ 60,991 $ 193,921
Weighted average common shares outstanding for computation of basic EPS 193,479,757 206,932,114 194,909,498 210,022,967
Common-equivalent shares due to the dilutive effect of stock options and unvested performance share grants⁽¹⁾
124,674 444,125 259,059 396,458
Weighted average common shares for computation of diluted EPS 193,604,431 207,376,239 195,168,557 210,419,425
EPS⁽²⁾:
Basic $ 0.25 $ 0.46 $ 0.31 $ 0.92
Diluted 0.25 0.46 0.31 0.92

⁽¹⁾ Represents incremental shares computed using the treasury stock method.

⁽²⁾ Anti-dilutive shares are not included in determining diluted EPS. ~~Anti-dilutive~~There were 0 anti-dilutive shares ~~were~~in the three and six months ended June 30, 2021 and 305,014 and 79,589 for the three and six months ended June 30, 2020, respectively. ~~There were 0 anti-dilutive shares in the three and six months ending June 30, 2019.~~

~~(14)~~(13) Stockholders’ Equity

(a) Regulatory Capital Requirements

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Capital adequacy guidelines, and additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk-weighting, and other factors.

The Company’s and the Bank’s Common Equity Tier 1 capital consists of common stock and related paid-in capital, net of treasury stock, and retained earnings. In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1 capital. Common Equity Tier 1 capital for both the Company and the Bank is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions.

Tier 1 capital includes Common Equity Tier 1 capital and additional Tier 1 capital. Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital (as defined in the regulations) for both the Bank and usCompany includes a permissible portion of the ~~ACL and $173.3 million and $145.5 million of the Subordinated Notes, respectively.~~ACL. Tier 2 capital at the Company also includes ~~$271.1~~$492.2 million of the Subordinated Notes - Company. During the final five years of the term of the Subordinated Notes, the permissible portion eligible for inclusion in Tier 2 capital decreases by 20% annually.


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

The Common Equity Tier 1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets (“RWA”). RWA is calculated based on regulatory requirements and includes total assets, excluding goodwill and other intangible assets, allocated by risk weight category, and certain off-balance-sheet items, among other items.

As permitted by the interim final rule issued on March 27, 2020 by our federal regulatory agency, we elected the option to delay the estimated impact of the adoption of ~~the~~ CECL ~~Standard in~~on our regulatory capital for two years. This ~~two-year~~two year delay is in addition to the three-year transition period the agency had already made available. The adoption will delay the effects of CECL on our regulatory capital for the next two years, after which the effects will be phased-in over a ~~three-year~~three year period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period include both the initial impact of adoption of ~~the~~ CECL ~~Standard~~ at January 1, 2020 and 25% of subsequent changes in our ACL during each quarter of the ~~two-year~~two year period ending December 31, 2021.

The following tables present actual and required capital ratios as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 for usthe Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are based on the fully phased-in provisions of the Basel III Capital Rules. Capital levels required to be considered well-capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

Actual Minimum capital required - Basel III Required to be considered well- capitalized
Capital amount Ratio Capital amount Ratio Capital amount Ratio
June 30, 2020
Common equity tier 1 to RWA:
Sterling National Bank $ 2,914,971 12.24 % $ 1,666,464 7.00 % $ 1,547,431 6.50 %
Sterling Bancorp 2,620,831 11.00 1,668,514 7.00 N/A N/A
Tier 1 capital to RWA:
Sterling National Bank 2,914,971 12.24 % 2,023,564 8.50 % 1,904,531 8.00 %
Sterling Bancorp 2,757,972 11.57 2,026,053 8.50 N/A N/A
Total capital to RWA:
Sterling National Bank 3,298,179 13.85 % 2,499,696 10.50 % 2,380,663 10.00 %
Sterling Bancorp 3,385,003 14.20 2,502,771 10.50 N/A N/A
Tier 1 leverage ratio:
Sterling National Bank 2,914,971 10.09 % 1,155,035 4.00 % 1,443,794 5.00 %
Sterling Bancorp 2,757,972 9.51 1,159,510 4.00 N/A N/A


	Actual				Minimum capital required - Basel III				Required to be considered well- capitalized
	Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
June 30, 2021
Common equity tier 1 to RWA:
Sterling National Bank	$	3,341,494	14.44	%	$	1,620,211	7.00	%	$	1,504,482	6.50	%
Sterling Bancorp	2,881,948		12.43		1,623,064		7.00		N/A		N/A
Tier 1 capital to RWA:
Sterling National Bank	3,341,494		14.44	%	1,967,400		8.50	%	1,851,670		8.00	%
Sterling Bancorp	3,018,172		13.02		1,970,864		8.50		N/A		N/A
Total capital to RWA:
Sterling National Bank	3,522,227		15.22	%	2,430,317		10.50	%	2,314,588		10.00	%
Sterling Bancorp	3,691,124		15.92		2,434,597		10.50		N/A		N/A
Tier 1 leverage ratio:
Sterling National Bank	3,341,494		12.10	%	1,105,002		4.00	%	1,381,253		5.00	%
Sterling Bancorp	3,018,172		10.91		1,106,661		4.00		N/A		N/A

4235


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)


		Actual						Minimum capital required - Basel III fully phased-in								Required to be considered well- capitalized					Actual				Minimum capital required - Basel III fully phased-in		Required to be considered well- capitalized
		Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio			Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
December 31, 2019
December 31, 2020														December 31, 2020
Common equity tier 1 to RWA:	Common equity tier 1 to RWA:													Common equity tier 1 to RWA:
Sterling National Bank	Sterling National Bank	$	2,882,208	12.32	%	$	1,637,001	7.00	%	$	1,520,073	6.50	%	Sterling National Bank	$	3,198,145	13.38	%	$	1,673,516	7.00	%	$	1,553,979	6.50	%
Sterling Bancorp	Sterling Bancorp	2,588,975		11.06		1,638,718		7.00		N/A		N/A		Sterling Bancorp	2,727,385		11.39		1,675,747		7.00		N/A		N/A
Tier 1 capital to RWA:	Tier 1 capital to RWA:													Tier 1 capital to RWA:
Sterling National Bank	Sterling National Bank	2,882,208		12.32	%	1,987,787		8.50	%	1,870,859		8.00	%	Sterling National Bank	3,198,145		13.38	%	2,032,127		8.50	%	1,912,590		8.00	%
Sterling Bancorp	Sterling Bancorp	2,726,556		11.65		1,989,872		8.50		N/A		N/A		Sterling Bancorp	2,864,074		11.96		2,034,836		8.50		N/A		N/A
Total capital to RWA:	Total capital to RWA:													Total capital to RWA:
Sterling National Bank	Sterling National Bank	3,162,282		13.52	%	2,455,502		10.50	%	2,338,574		10.00	%	Sterling National Bank	3,521,458		14.73	%	2,510,274		10.50	%	2,390,737		10.00	%
Sterling Bancorp	Sterling Bancorp	3,252,412		13.89		2,458,077		10.50		N/A		N/A		Sterling Bancorp	3,638,033		15.20		2,513,621		10.50		N/A		N/A
Tier 1 leverage ratio:	Tier 1 leverage ratio:													Tier 1 leverage ratio:
Sterling National Bank	Sterling National Bank	2,882,208		10.11	%	1,140,570		4.00	%	1,425,713		5.00	%	Sterling National Bank	3,198,145		11.33	%	1,128,913		4.00	%	1,411,142		5.00	%
Sterling Bancorp	Sterling Bancorp	2,726,556		9.55		1,141,603		4.00		N/A		N/A		Sterling Bancorp	2,864,074		10.14		1,130,362		4.00		N/A		N/A

The Bank and the Company are subject to the regulatory capital requirements administered by the FRB, and, for the Bank, the Office of the Comptroller of the Currency. Regulatory authorities can initiate certain mandatory actions if the Bank or the Company fails to meet the minimum capital requirements, which could have a direct material effect on our financial statements. As of June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, the most recent regulatory notifications categorized the Company and the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the classification.

~~(15)~~(14) Commitments and Contingencies

(a) Off-Balance Sheet Financial Instruments

The contractual or notional amounts of these instruments, which reflect the extent of our involvement in particular classes of off-balance sheet financial instruments, are summarized as follows:


		June 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Loan origination commitments	Loan origination commitments	$	524,726	$	565,392	Loan origination commitments	$	596,603	$	641,965
Unused lines of credit	Unused lines of credit	1,656,854		1,532,702		Unused lines of credit	1,602,172		1,623,745
Letters of credit	Letters of credit	260,708		307,287		Letters of credit	171,237		181,890

We record ACL - off-balance sheet financial instrument exposures through a charge to other non-interest expense on our consolidated income statements. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the ACL - off-balance sheet financial instrument credit exposures was $6.7 million ~~and $654 thousand, respectively,~~ and was included in other liabilities in our consolidated balance sheets. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, credit loss expense for ~~off balance~~off-balance sheet financial instrument exposures was zero. In connection with the adoption of the CECL Standard, we increased the ACL - off-balance sheet credit exposures by $6.1 million. We did not adjust this amount during the three and six months ended June 30, 2020 based0. Based on our review of quantitative and qualitative factors applicable to these financial instrument ~~exposures.~~exposures, we did not record an increase in our off-balance sheet credit loss provision during the three or six months ended June 30, 2021 and 2020.

~~(b) Leases~~

~~Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2020 were as follows:~~

4336


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

Remainder of 2020 $ 9,541
2021 17,967
2022 16,195
2023 14,693
2024 12,894
2025 10,261
2026 and thereafter 45,237
Total lease payments 126,788
Interest 17,114
Present value of lease liabilities $ 109,674
(b) Leases

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2021 were as follows:


Remainder of 2021	$	9,311
2022	18,174
2023	16,710
2024	14,895
2025	12,184
2026	11,054
2027 and thereafter	39,161
Total lease payments	121,489
Interest	15,419
Present value of lease liabilities	$	106,070

We and the Bank are involved in a number of judicial proceedings concerning matters arising from our and its business activities. These include routine legal proceedings arising in the ordinary course of business. These proceedings also include actions brought against us and the Bank with respect to corporate matters and transactions in which we and the Bank are or were involved.

Following the Merger announcement, 6 civil actions were filed challenging, among other things, the adequacy of the disclosures contained in the preliminary proxy statement/prospectus filed by Webster with the SEC in connection with the proposed transaction. Five of these suits were filed by purported Sterling stockholders against Sterling and its Board and assert claims under Sections 14(a) and 20(a) of the Exchange Act challenging the adequacy of the public disclosures made concerning the proposed transaction. One of these five suits also asserts a claim against Webster. The sixth suit was filed by a purported Webster stockholder against Webster and its board of directors and asserts similar claims against Webster. The plaintiffs in these actions seek, among other things, an injunction preventing the closing of the Merger, rescission of the Merger Agreement or damages in the event it is consummated, and the award of attorneys' fees and expenses. Sterling believes the claims asserted in these actions are without merit.

There can be no assurance as to the ultimate outcome of a legal proceeding; however, we and the Bank have generally denied liability in all significant litigation pending against us and intend to vigorously defend ~~vigorously~~ each case, other than matters that are determined appropriate to be settled. We and the Bank accrue a liability for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had 0 significant amounts accrued ~~for~~in respect of pending litigation.

~~(16)~~(15) Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction occurring in the principal or most advantageous market for such asset or liability between market participants on the measurement date. In estimating fair value, we use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. GAAP establishes a fair value hierarchy comprised of three levels of inputs that may be used to measure fair values.

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risk, etc.) or inputs that are derived principally from, or corroborated by, market data by correlation or other means.

Level 3 Inputs – Unobservable inputs for determining the fair value of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

In general, fair value is based on quoted market prices, when available. If quoted market prices in active markets are not available, fair value is based on internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and our creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincide with our monthly and/or quarterly valuation process.

AFS Investment Securities ~~AFS~~

~~The majority~~All of our available for sale investment securities are reported at fair value utilizing Level 2 inputs. For these securities, we obtain fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things.

We review the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, we do not purchase investment securities that have a complicated structure. Our entire portfolio consists of traditional investments, nearly all of which are mortgage pass-through securities, state and municipal general obligation or revenue bonds, U.S. agency bullet and callable securities and corporate bonds. Pricing for such instruments is fairly generic and is easily obtained. From time to time, we validate, on a sample basis, prices supplied by the independent pricing service by comparison to prices obtained from third-party sources or derived using internal models.

As of June 30, 2021 and December 31, 2020, management did not believe any of our securities are other-than-temporarily-impaired; however, management reviews all of our securities on at least a quarterly basis to assess whether impairment, if any, is ~~other-than-temporarily-impaired.~~other than temporary.

Derivatives

The fair values of derivatives are based on valuation models using current observable market data (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counterparty as of the measurement date, which are considered Level 2 inputs. Our derivatives ~~are~~may be traded in an over-the-counter market where quoted market prices are not always available. Our derivatives at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 consisted of interest rate swaps. See Note 9.8. “Derivatives” for additional information.

A summary of assets and liabilities at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, measured at estimated fair value on a recurring basis, is as follows:


	June 30, 2021
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed	$	916,923	$	0	$	916,923	$	0
CMOs/Other MBS	274,560		0		274,560		0
Total residential MBS	1,191,483		0		1,191,483		0
Other securities:
Federal agencies	384,819		0		384,819		0
Corporate	715,142		0		715,142		0
State and municipal	379,556		0		379,556		0


Total other securities	1,479,517		0		1,479,517		0
Total AFS	2,671,000		0		2,671,000		0
Swaps	107,361		0		107,361		0
Total assets	$	2,778,361	$	0	$	2,778,361	$	0
Liabilities:
Swaps	$	43,354	$	0	$	43,354	$	0
Total liabilities	$	43,354	$	0	$	43,354	$	0

June 30, 2020
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Assets:
Investment securities available for sale:
Residential MBS:
Agency-backed $ 1,141,603 $ — $ 1,141,603 $ —
CMOs/Other MBS 464,561 — 464,561 —
Total residential MBS 1,606,164 — 1,606,164 —
Other securities:
Federal agencies 146,917 — 146,917 —
Corporate 469,394 — 469,394 —
State and municipal 398,149 — 398,149 —
Total other securities 1,014,460 — 1,014,460 —
Total AFS 2,620,624 — 2,620,624 —
Swaps 174,553 — 174,553 —
Total assets $ 2,795,177 $ — $ 2,795,177 $ —
Liabilities:
Swaps $ 69,344 $ — $ 69,344 $ —
Total liabilities $ 69,344 $ — $ 69,344 $ —


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~


		December 31, 2019															December 31, 2020
		Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs			Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Assets:	Assets:									Assets:
Investment securities available for sale:	Investment securities available for sale:									Investment securities available for sale:
Residential MBS:	Residential MBS:									Residential MBS:
Agency-backed	Agency-backed	$	1,615,119	$	—	$	1,615,119	$	—	Agency-backed	$	918,260	$	0	$	918,260	$	0
CMOs/Other MBS	CMOs/Other MBS	512,277		—		512,277		—		CMOs/Other MBS	373,284		0		373,284		0

Total residential MBS	Total residential MBS	2,127,396		—		2,127,396		—		Total residential MBS	1,291,544		0		1,291,544		0

Federal agencies	Federal agencies	201,138		—		201,138		—		Federal agencies	156,467		0		156,467		0
Corporate	Corporate	320,922		—		320,922		—		Corporate	463,512		0		463,512		0
State and municipal	State and municipal	446,192		—		446,192		—		State and municipal	387,095		0		387,095		0

Total other securities	Total other securities	968,252		—		968,252		—		Total other securities	1,007,074		0		1,007,074		0
Total AFS	Total AFS	3,095,648		—		3,095,648		—		Total AFS	2,298,618		0		2,298,618		0
Swaps	Swaps	67,318		—		67,318		—		Swaps	149,797		0		149,797		0
Total assets	Total assets	$	3,162,966	$	—	$	3,162,966	$	—	Total assets	$	2,448,415	$	0	$	2,448,415	$	0
Liabilities:	Liabilities:									Liabilities:
Swaps	Swaps	$	24,314	$	—	$	24,314	$	—	Swaps	$	60,004	$	0	$	60,004	$	0
Total liabilities	Total liabilities	$	24,314	$	—	$	24,314	$	—	Total liabilities	$	60,004	$	0	$	60,004	$	0

The following categories of financial assets are not measured at fair value on a recurring basis, but are subject to fair value adjustments in certain circumstances.

Collateral Dependent Loans

For collateral dependent loans, which are presented in the table below, where we determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For real estate loans, the fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. The unobservable inputs may vary depending on the individual assets. We review third party appraisals for appropriateness and adjust the value downward to consider selling and closing costs, which generally range from 4% to 10% of the appraised value. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business.


	June 30, 2021
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Traditional C&I	$	2,976	$	0	$	0	$	2,976

Payroll finance	652		0		0		652

Equipment financing	3,174		0		0		3,174
CRE	24,123		0		0		24,123

ADC	25,000		0		0		25,000
Residential mortgage	549		0		0		549
Consumer	3,189		0		0		3,189
Total collateral dependent loans measured at fair value	$	59,663	$	0	$	0	$	59,663

June 30, 2020
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Traditional C&I $ 9,814 $ — $ — $ 9,814
Asset-based lending 7,869 — — 7,869
Factored receivables 6,320 — — 6,320
Equipment financing 2,931 — — 2,931
CRE 9,841 — — 9,841
Residential mortgage 2,924 — — 2,924
Consumer 1,711 — — 1,711
Total collateral dependent loans measured at fair value $ 41,410 $ — $ — $ 41,410


	December 31, 2020
	Fair value		Level 1 inputs		Level 2 inputs		Level 3 inputs
Traditional C&I	$	10,916	$	0	$	0	$	10,916
ABL	1,899		0		0		1,899
Payroll finance	2,300		0		0		2,300


CRE	27,323		0		0		27,323


Residential mortgage	1,307		0		0		1,307
Consumer	3,593		0		0		3,593
Total collateral dependent loans measured at fair value	$	47,338	$	0	$	0	$	47,338

Fair Value of Financial Instruments

The following is a summary of the carrying amounts and estimated fair value of financial assets and liabilities (none of which were held for trading purposes) as of June 30, 2021:


	June 30, 2021
	Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs
Financial assets:
Cash and cash equivalents	$	487,409	$	487,409	$	0	$	0
Securities AFS	2,671,000		0		2,671,000		0
Securities HTM, net	1,695,470		0		1,813,262		0
Loans held for sale	19,088		0		19,088		0
Portfolio loans, net	20,409,224		0		0		20,362,871
Accrued interest receivable on securities	28,428		0		28,428		0
Accrued interest receivable on loans	68,300		0		0		68,300
FHLB stock and FRB stock	151,443		0		0		0
Swaps	107,361		0		107,361		0
Financial liabilities:
Non-maturity deposits	21,712,958		21,712,958		0		0
Certificates of deposit	1,433,753		0		1,432,649		0


Other borrowings	25,802		0		25,801		0


Subordinated Notes - Company	492,219		0		525,679		0
Mortgage escrow funds	66,521		0		66,521		0
Accrued interest payable on deposits	529		0		529		0
Accrued interest payable on borrowings	1,484		0		1,484		0
Swaps	43,354		0		43,354		0

The following is a summary of the carrying amounts and estimated fair value of financial assets and liabilities (none of which were held for trading purposes) as of December 31, 2020:


	December 31, 2020
	Carrying amount		Level 1 inputs		Level 2 inputs		Level 3 inputs
Financial assets:
Cash and cash equivalents	$	305,002	$	305,002	$	0	$	0
Securities AFS	2,298,618		0		2,298,618		0
Securities HTM	1,740,838		0		1,874,504		0
Loans held for sale	11,749		0		11,749		0
Portfolio loans, net	21,522,309		0		0		21,791,489
Accrued interest receivable on securities	26,508		0		26,508		0
Accrued interest receivable on loans	70,997		0		0		70,997
FHLB stock and FRB stock	166,190		0		0		0
Swaps	149,797		0		149,797		0
Financial liabilities:
Non-maturity deposits	21,122,692		21,122,692		0		0
Certificates of deposit	1,996,830		0		2,002,702		0
FHLB borrowings	382,000		0		382,000		0
Other borrowings	304,101		0		304,101		0

Subordinated Notes - Bank	143,703		0		145,870		0
Subordinated Notes - Company	491,910		0		506,497		0
Mortgage escrow funds	59,686		0		59,686		0
Accrued interest payable on deposits	1,068		0		1,068		0
Accrued interest payable on borrowings	3,425		0		3,425		0
Swaps	60,004		0		60,004		0

(16) Accumulated Other Comprehensive Income

Components of accumulated other comprehensive income were as follows as of the dates shown below:


	June 30,		December 31,
	2021		2020
Net unrealized holding gain on available for sale securities	$	95,960	$	115,523
Related income tax expense	(26,523)		(31,931)
Available for sale securities, net of tax	69,437		83,592
Net unrealized holding loss on securities transferred to held to maturity	(263)		(348)
Related income tax benefit	73		96
Securities transferred to held to maturity, net of tax	(190)		(252)
Net unrealized holding (loss) gain on retirement plans	(481)		2,040
Related income tax benefit (expense)	133		(564)
Retirement plans, net of tax	(348)		1,476
Accumulated other comprehensive income	$	68,899	$	84,816

4637


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

~~Impaired Loans~~The following table presents the changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the three months ended June 30, 2021 and 2020:


	Net unrealized holding gain on available for sale securities		Net unrealized holding (loss) on securities transferred to held to maturity		Net unrealized holding (loss) gain on retirement plans		Total
For the three months ended June 30, 2021
Balance beginning of the period	$	58,523	$	(219)	$	(713)	$	57,591

Other comprehensive income before reclassification	10,914		0		0		10,914

Amounts reclassified from AOCI	0		29		365		394
Total other comprehensive income	10,914		29		365		11,308
Balance at end of period	$	69,437	$	(190)	$	(348)	$	68,899
For the three months ended June 30, 2020
Balance beginning of the period	$	67,249	$	(468)	$	840	$	67,621

Other comprehensive income before reclassification	21,242		0		0		21,242

Amounts reclassified from AOCI	(351)		43		55		(253)
Total other comprehensive income	20,891		43		55		20,989
Balance at end of period	$	88,140	$	(425)	$	895	$	88,610
Location in consolidated income statements where reclassification from accumulated other comprehensive income is included	Net (loss) gain on sale of securities		Interest income on securities		Other non-interest expense

~~Impaired loans subject to non-recurring fair value measurements were $38.1 million at December 31, 2019.~~

December 31, 2019
Fair value Level 1 inputs Level 2 inputs Level 3 inputs
Traditional C&I $ 14,515 $ — $ — $ 14,515
Asset-based lending 3,772 — — 3,772
Equipment financing 1,794 — — 1,794
CRE 12,614 — — 12,614
Multi-family 1,184 — — 1,184
Residential mortgage 2,924 — — 2,924
Consumer 1,300 — — 1,300
Total impaired loans measured at fair value $ 38,103 $ — $ — $ 38,103


The following table presents the changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the six months ended June 30, 2021 and 2020:
	Net unrealized holding (loss) gain on available for sale securities		Net unrealized holding (loss) gain on securities transferred to held to maturity		Net unrealized holding gain (loss) on retirement plans		Total
For the six months ended June 30, 2021
Balance beginning of the period	$	83,592	$	(252)	$	1,476	$	84,816

Other comprehensive loss before reclassification	(13,644)		0		0		(13,644)

Amounts reclassified from AOCI	(511)		62		(1,824)		(2,273)
Total other comprehensive (loss) income	(14,155)		62		(1,824)		(15,917)
Balance at end of period	$	69,437	$	(190)	$	(348)	$	68,899
For the six months ended June 30, 2020
Balance beginning of the period	$	38,056	$	(538)	$	2,698	$	40,216

Other comprehensive income before reclassification	56,521		0		0		56,521

Amounts reclassified from AOCI	(6,437)		113		(1,803)		(8,127)
Total other comprehensive income (loss)	50,084		113		(1,803)		48,394
Balance at end of period	$	88,140	$	(425)	$	895	$	88,610
Location in consolidated income statements where reclassification from AOCI is included	Net (loss) gain on sale of securities		Interest income on securities		Other non-interest expense

~~Fair Value of Financial Instruments~~

~~The following is a summary of the carrying amounts and estimated fair value of financial assets and liabilities (none of which were held for trading purposes) as of June 30, 2020:~~

June 30, 2020
Carrying
amount
Level 1 inputs
Level 2 inputs
Level 3 inputs
Financial assets:
Cash and cash equivalents $ 324,729 $ 324,729 $ — $ —
Securities AFS 2,620,624 — 2,620,624 —
Securities HTM 1,924,955 — 2,034,333 —
Loans held for sale 44,437 — 44,437 —
Portfolio loans, net 21,929,778 — — 21,984,602
Accrued interest receivable on securities 28,602 — 28,602 —
Accrued interest receivable on loans 72,694 — — 72,694
FHLB stock and FRB stock 193,666 — — —
Swaps 174,553 — 174,553 —
Financial liabilities:
Non-maturity deposits 20,966,503 20,966,503 — —
Certificates of deposit 2,634,118 — 2,646,178 —
FHLB borrowings 975,058 — 983,650 —
Paycheck Protection Program Lending Facility 568,350 — 568,160 —
Other borrowings 26,448 — 26,448 —
Subordinated Notes - Company 271,096 — 262,870 —
Subordinated Notes - Bank 173,307 — 179,095 —
Mortgage escrow funds 69,686 — 69,686 —
Accrued interest payable on deposits 2,232 — 2,232 —
Accrued interest payable on borrowings 3,686 — 3,686 —
Swaps 69,344 — 69,344 —
(17) Recently Issued Accounting Standards Not Yet Adopted

ASU 2020-04, “

Reference Rate Reform (Topic 848)”

(“ASU 2020-04”) provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. Subject to certain conditions, where an agreement, contract or transaction is modified in connection with

4738


Table of Contents			STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Dollars in thousands within tabular disclosure, except share and per share data)

~~The following is a summary of~~ the ~~carrying amounts and estimated fair value of financial assets and liabilities (none of which were held for trading purposes) as of December 31, 2019:~~

December 31, 2019
Carrying
amount
Level 1 inputs
Level 2 inputs
Level 3 inputs
Financial assets:
Cash and cash equivalents $ 329,151 $ 329,151 $ — $ —
Securities available for sale 3,095,648 — 3,095,648 —
Securities held to maturity 1,979,661 — 2,053,191 —
Loans held for sale 8,125 — 8,125 —
Portfolio loans, net 21,333,974 — — 21,382,990
Accrued interest receivable on securities 29,308 — 29,308 —
Accrued interest receivable on loans 71,004 — — 71,004
FHLB stock and FRB stock 251,805 — — —
Swaps 67,318 — 67,318 —
Financial liabilities:
Non-maturity deposits 18,970,607 18,970,607 — —
Certificates of deposit 3,448,051 — 3,444,669 —
FHLB borrowings 2,245,653 — 2,248,851 —
Other borrowings 22,678 — 22,677 —
Senior Notes 173,504 — 173,733 —
Subordinated Notes 444,123 — 453,512 —
Mortgage escrow funds 58,316 — 58,315 —
Accrued interest payable on deposits 5,427 — 5,427 —
Accrued interest payable on borrowings 8,629 — 8,629 —
Swaps 24,314 — 24,314 —

~~(17) Accumulated Other Comprehensive Income~~

~~Components of accumulated other comprehensive income were as follows as of the dates shown below:~~

June 30, December 31,
2020 2019
Net unrealized holding gain on available for sale securities $ 121,807 $ 52,593
Related income tax (expense) (33,667) (14,537)
Available for sale securities, net of tax 88,140 38,056
Net unrealized holding loss on securities transferred to held to maturity (587) (744)
Related income tax benefit 162 206
Securities transferred to held to maturity, net of tax (425) (538)
Net unrealized holding gain on retirement plans 1,237 3,728
Related income tax expense (342) (1,030)
Retirement plans, net of tax 895 2,698
Accumulated other comprehensive income $ 88,610 $ 40,216


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~The following table presents the changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the three and six months ended June 30, 2020 and 2019:~~

Net unrealized holding gain (loss) on available for sale securities Net unrealized holding (loss) gain on securities transferred to held to maturity Net unrealized holding gain on retirement plans Total
For the three months ended June 30, 2020
Balance beginning of the period $ 67,249 $ (468) $ 840 $ 67,621
Other comprehensive income before reclassification 21,242 — — 21,242
Amounts reclassified from AOCI (351) 43 55 (253)
Total other comprehensive income 20,891 43 55 20,989
Balance at end of period $ 88,140 $ (425) $ 895 $ 88,610
For the three months ended June 30, 2019
Balance beginning of the period $ (19,577) $ (797) $ 13,764 $ (6,610)
Other comprehensive income before reclassification 46,438 — — 46,438
Amounts reclassified from AOCI 382 88 48 518
Total other comprehensive income 46,820 88 48 46,956
Balance at end of period $ 27,243 $ (709) $ 13,812 $ 40,346
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is included Net gain (loss) on sale of securities Interest income on securities Other non-interest expense


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

Net unrealized holding (loss) gain on available for sale securities Net unrealized holding (loss) gain on securities transferred to held to maturity Net unrealized holding gain (loss) on retirement plans Total
For the six months ended June 30, 2020
Balance beginning of the period $ 38,056 $ (538) $ 2,698 $ 40,216
Other comprehensive income before reclassification 56,521 — — 56,521
Amounts reclassified from AOCI (6,437) 113 (1,803) (8,127)
Total other comprehensive income (loss) 50,084 113 (1,803) 48,394
Balance at end of period $ 88,140 $ (425) $ 895 $ 88,610
For the six months ended June 30, 2019
Balance beginning of the period $ (75,077) $ (2,546) $ 11,678 $ (65,945)
Other comprehensive income before reclassification 100,946 — — 100,946
Securities reclassified from held to maturity to available for sale (8,548) — — (8,548)
Amounts reclassified from AOCI 9,922 1,837 2,134 13,893
Total other comprehensive income 102,320 1,837 2,134 106,291
Balance at end of period $ 27,243 $ (709) $ 13,812 $ 40,346
Location in consolidated income statements where reclassification from AOCI is included Net loss on sale of securities Interest income on securities Other non-interest expense


~~Table of Contents~~			~~STERLING BANCORP AND SUBSIDIARIES~~ ~~Notes to Consolidated Financial Statements (Unaudited)~~ ~~(Dollars in thousands within tabular disclosure, except share and per share data)~~

~~(19) Recently Issued Accounting Standards Not Yet Adopted~~

~~ASU 2019-12,~~ ~~“Income Taxes (Topic 740)”~~ (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and improves the consistent application of GAAP by clarifying and amending other existing guidance. ASU 2019-012 will be effective for us on January 1, 2021, and is not expected to have a material impact on our consolidated financial statements.

~~ASU 2020-01~~ ~~“Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)”~~ (“ASU 2020-01”) clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 will be effective for us on January 1, 2021, and is not expected to have a material impact on our consolidated financial statements.

~~ASU 2020-04, “Reference Rate Reform (Topic 848)”~~ (“ASU 2020-04”) provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform, ~~and that meet certain scope~~the guidance permits: (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered “minor” so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. We may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once optional expedients are elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any LIBOR transition related modifications we execute between the selected start date (yet to be determined) and December 31, 2022 ~~that are directly related to LIBOR transition~~ by allowing prospective recognition of the continuation of the ~~contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs.~~contract. We are evaluating the impacts of this ASU and have not yet determined whether the LIBOR transition and our adoption of this ASU will have a material effect on our business operations and consolidated financial statements.

ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope.” (“ASU 2021-01”) clarifies that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment due to reference rate reform are in the scope of ASC 848. Entities may apply certain optional expedients in ASC 848 to derivative instruments that do not reference LIBOR or another rate expected to be discontinued as a result of reference rate reform if there is a change to the interest rate used for discounting, margining or contract price alignment. ASU 2021-01 also clarifies other aspects of ASC 848 and provides new guidance on how to address the effects of the cash compensation adjustment that is provided as part of the above change on certain aspects of hedge accounting. ASU 2021-01 is effective upon issuance and generally can be applied through December 31, 2022, similar to the rest of the relief provided under ASC 848. As we currently do not utilize hedge accounting, the guidance on hedge accounting is not expected to have a material effect on our business operations and consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

We make statements in this report, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other financial, business or strategic matters regarding or affecting us that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “target,” “estimate,” “forecast,” “project,” by future conditional verbs such as “will,” “should,” “would,” “could” or “may,” or by variations of such words or by similar expressions. These statements are not historical facts, but instead represent our current expectations, plans or forecasts and are based on the beliefs and assumptions of management and the information available to management at the time that these disclosures were prepared.

Forward-looking statements are subject to numerous assumptions, risks (both known and unknown) and uncertainties, and other factors which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions, risks, uncertainties, and other factors, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance.

The factors described in Part II. Item 1A. Risk Factors of this report or otherwise described in our filings with the SEC, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations expressed in our forward-looking statements, including, but not limited to:

•risk related to the merger and integration of the Company into Webster including, among others, (i) failure to complete the merger with Webster or unexpected delays related to the merger or either party’s inability to obtain regulatory or stockholder approvals or satisfy other closing conditions required to complete the merger, (ii) expenses related to the proposed merger, (iii) a fluctuation in the market price of Webster’s common stock causing our stockholders not to be certain of the precise value of merger consideration, (iv) stockholder litigation that could prevent or delay the closing of the proposed merger or otherwise negatively impact the Company’s business and operations, (v) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (vi) the risk that the integration of each party's operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate each party's businesses into the other's businesses, and (vii) deposit attrition, customer loss and/or revenue loss following the completed merger that exceeds expectations;

STERLING BANCORP AND SUBSIDIARIES

•our ability to successfully implement growth and other strategic initiatives and ~~to integrate and fully realize cost savings and other benefits we estimate in connection with acquisitions and limit business disruption arising therefrom;~~reduce expenses;

•oversight of the Bank by ~~the Consumer Financial Protection Bureau;~~various federal regulators;

•adverse publicity, regulatory actions or litigation with respect to us or other well-known companies and the financial services industry in general and a failure to satisfy regulatory standards;

~~STERLING BANCORP AND SUBSIDIARIES~~

•the effects of and changes in monetary ~~and~~ policies of the ~~Board of Governors of the Federal Reserve System~~FRB and the U.S. Government, respectively;

•our ability to make accurate assumptions and judgments about an appropriate level of ~~allowance for loan losses~~ACL - loans and the ~~collectibility~~collectability of our loan portfolio, including changes in the level and trend of loan delinquencies and write-offs that may lead to increased losses and non-performing assets in our loan portfolio, result in our ~~allowance for loan losses~~ACL - loans not being adequate to cover actual losses, ~~and/or~~and require us to materially increase our reserves;

•our use of estimates in determining the fair value of certain of our assets, which ~~estimates~~ may prove to be incorrect and result in significant declines in valuation;

•our ability to manage changes in market interest ~~rates, which could adversely affect our financial condition and results of operations;~~rates;

•our ability to capitalize on our substantial investments in our information technology and operational infrastructure and systems;

•changes in other economic, competitive, governmental, regulatory, and technological factors affecting our markets, operations, pricing, products, services and fees;

•~~effects~~the ongoing trajectory of COVID-19 and the extent to and speed at which the global economy recovers, the nature and extent of ongoing governmental measures to contain the pandemic, the speed and efficacy of the ~~novel coronavirus disease (COVID-19), which include, but are not limited to, the federal,~~vaccine roll out in New York state and ~~local government actions and reactions to COVID-19,~~nationally, the ~~health~~availability of our colleagues, ~~and that of~~the impact on our clients ~~the continuity of our, our clients’~~ and ~~our third party providers’ operations, the increased likelihood of cyber and payment fraud risk,~~vendors, including the continued ability of our borrowers to repay their ~~loans throughout~~borrowings in accordance with loan terms, and ~~following the pandemic,~~ the potential ~~decline~~impact of a more severe or prolonged dampening in ~~collateral values resulting from COVID-19 and its effects, and the resulting impact upon~~demand for our ~~financial position, results of operations, cash flows and our outlook;~~products; and

•our success at managing the risks involved in the foregoing and managing our business.

These risks and uncertainties should be considered in evaluating our forward-looking statements, and undue reliance should not be placed on such statements.

Impact of COVID-19

The COVID-19 pandemic ~~has~~ resulted ~~in, and is likely to continue to result~~ in significant economic disruption adversely affecting our business and the business of our clients. AsWe experienced a material decline in revenues in the second quarter of 2020, as a result of the ~~date~~decline in market interest rates, dampened demand for our lending products in our target markets and a significant decline in transactional activity in our receivables management and payroll businesses. We saw a recovery in our revenues during the second half of ~~this filing, significant uncertainty exists concerning~~2020 and into the ~~magnitude~~first half of 2021, as business conditions improved, driving increased demand for our products and an increase in the ~~impact and duration~~amount of new business generated. Although loan origination activity has continued to recover in the ~~COVID-19 pandemic.~~second quarter of 2021, prepayment activity in certain portfolios remained elevated, which impacted our earning asset balances.

Our consolidated financial statements reflect estimates and assumptions we make that ~~affect~~impact the reported amounts of assets and liabilities, including the amount of the ACL we ~~established. We considered the~~establish. The impact of the COVID-19 onpandemic and the ~~assumptions~~severe deterioration in macro-economic conditions that has resulted from it and ~~estimates used which~~the ongoing governmental measures needed to contain it, had a material adverse effect on the amount of our provision for credit ~~losses. The~~losses - loans in 2020. Our provision for credit loss is discussed further below in “Results of Operations - Provision for Credit Losses - Loans.”

There is still significant uncertainty concerning the ongoing trajectory of the COVID-19 pandemic ~~has also resulted in a significant amount~~and the speed at which the national and local economy will recover, and the extent to which COVID-19 will continue to adversely affect our business will depend on numerous evolving factors and future developments that we are not able to predict, including the new Delta variant of ~~client requests for forbearance, which are in process~~COVID-19 (which appears to be the most transmissible variant to date), the effectiveness of ~~review~~continuing containment measures, including the speed of the ongoing vaccine distribution effort, the efficacy of the various vaccines, and ~~implementation.~~how quickly and to what extent normal economic and operating conditions can resume.

LIBOR Transition and Phase-Out

We have a significant amount of loans, borrowings and swaps that are tied to LIBOR benchmark interest rates. It is anticipated that the LIBOR index will be ~~phased-out~~phased out by the end of 2021 and the Federal Reserve Bank of New York has established the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR. We have created a sub-committee of our Asset Liability Management Committee to address LIBOR transition and ~~phase-out~~phase out issues. This committee includes personnel from legal, loan operations, risk, IT, credit, business intelligence, treasury, corporate banking, marketing, audit, accounting and corporate development. We are currently reviewing loan documentation, technology systems and procedures we will need to implement for the transition.

STERLING BANCORP AND SUBSIDIARIES

General

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist the reader in understanding our financial condition and results of operations. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes included in Part I, Item 1 of this report and with our audited consolidated financial statements, including the accompanying notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2019~~2020 Form 10-K. Operating results discussed herein are not necessarily indicative of the results of any future period.

Tax equivalent adjustments are the result of increasing the income from tax exempt securities by an amount equal to the federal taxes that would be paid if the income were fully taxable based on a 21% effective income tax rate.

Dollar amounts in tables are stated in thousands, except for share and per share amounts and ratios.

~~STERLING BANCORP AND SUBSIDIARIES~~

Overview and Management Strategy

The Bank operates as a regional bank providing a broad offering of deposit, lending and wealth management products to commercial, consumer and municipal clients in ~~our market area.~~

~~Our primary strategic objective is to drive positive operating leverage, which we believe will allow us to generate sustainable growth in revenues~~the Greater New York metropolitan area and earnings over time. We define operating leverage as the ratio of growth in adjusted total revenue divided by growth in adjusted total operating expenses (a reconciliation of non-GAAP financial measures is included beginning on page 73~~). To achieve this goal, we focus on the following initiatives:~~

•~~Target specific “high value” client segments and geographic markets in which we have competitive advantages.~~

•~~Deploy a single point of contact, relationship-based distribution strategy through our commercial banking teams and financial centers.~~

•Continuously expand and refine our delivery and distribution channels by rationalizing our investments in businesses that do not meet our risk-adjusted return targets and re-allocating our capital and resources to other businesses that are in-line with our commercial banking strategy and risk-adjusted return targets.

•~~Maximize efficiency through a technology enabled, low-cost operating platform and by controlling operating costs.~~

•~~Create a high productivity culture through differentiated compensation programs based on a pay-for-performance philosophy.~~

•~~Maintain strong risk management systems and proactively manage enterprise risk.~~

nationally. The Bank targets the following geographic markets: (i) the New York Metro Market, which includes Manhattan and Long Island; and (ii) the New York Suburban Market, which includes Rockland, Orange, Sullivan, Ulster ~~Putnam~~ and Westchester Counties in New York and Bergen County in New Jersey. ~~The Bank also originates loans and deposits in select markets nationally through~~Through our asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance businesses ~~(collectively, our commercial finance businesses).~~the Bank also originates loans and deposits in select markets nationally including California, Connecticut, Michigan, Texas and Illinois. We believe the Bank operates in an attractive footprint that presents us with significant opportunities to execute our strategy of targeting small and middle market commercial clients and affluent consumers. We believe that this is a client segment that is underserved by larger bank competitors in our market area.

Our primary strategic objective is to generate sustainable growth in revenue and earnings over time while driving positive operating leverage. We ~~deploy~~define operating leverage, which is a ~~team-based~~non-GAAP measurement, as the ratio of growth in adjusted total revenue divided by growth in adjusted total operating expenses. To achieve this goal, we focus on the following initiatives:

•Target specific “high value” client segments and industry sectors in which we have competitive advantages and can generate attractive risk-adjusted returns.

•Deploy a single point of contact, relationship-based distribution strategy through our commercial banking teams, business banking teams and financial centers, in which ~~clients~~our colleagues are ~~served by a focused and experienced group of relationship managers who are~~directly responsible for managing all aspects of the client relationship and delivery of our products and services. Our commercial banking teams generate significant originations of loans and deposits, which are augmented by strategic portfolio acquisitions. As of June 30, 2020, we had 30 commercial banking teams and 78 full service financial centers. We currently anticipate that we will increase our number of commercial banking teams by three to five annually, while reducing our financial centers as we continue to execute our real estate and financial center consolidation strategy.experience.

•Augment our distribution and client coverage strategy with a contemporary digital product and service offering that provides our commercial and consumer clients with the flexibility to self-serve or interact with us through various channels.

•Expand into new technology-enabled, growth-oriented business verticals, including direct banking offerings and leverage our platform and technology to provide banking to other financial services providers (“Banking as a Service”).

•Invest in technology to build a robust operating platform that uses artificial intelligence and related automation tools to maximize efficiency.

•Create a high productivity culture through differentiated compensation programs based on a pay-for-performance philosophy.

•Maintain and continue to enhance our strong risk management systems and proactively manage enterprise risk.

STERLING BANCORP AND SUBSIDIARIES

Recent Developments

Effective January 1, 2020, we adopted the CECL Standard which increased our ACL - loans by $90.6 million, our ACL - HTM securities by $796 thousand and our ACL - off-balance sheet credit exposures by $6.1 million. Net of tax, our equity was reduced $54.3 million on January 1, 2020, which was presented as a cumulative effect of a change in accounting principle.

~~Earnings performance~~On April 18, 2021 Sterling and Webster entered into a definitive Merger Agreement, pursuant to which we and Webster have agreed to combine our respective companies in an all stock merger of equals. The Merger Agreement provides that, upon the terms and subsequent conditions set forth therein, we will merge with and into Webster, with Webster continuing as the surviving entity, in a transaction we refer to as the “Merger”. The Merger Agreement was approved by the boards of directors of Sterling and Webster, and is subject to stockholder and regulator approval and other customary closing conditions.

Under the terms of the Merger Agreement, stockholders of Sterling will receive 0.463 of a share of Webster for each share of Sterling common stock they own. After the merger, it is anticipated that Webster shareholders will own approximately 50.4% and Sterling stockholders will own approximately 49.6% of the combined company. The combined company will have approximately $64 billion of assets, $42 billion in loans and $52 billion in deposits. We are progressing with our integration efforts and have identified the senior leadership of the combined company. In addition, we have filed the proxy statement / prospectus and are requesting stockholders approval of the Merger on or before August 17, 2021. The transaction is expected to close in the fourth quarter of 2021.

Performance Summary
For the second quarter of ~~2020 included~~2021, we reported net income available to common stockholders of ~~$48.8~~$96.4 million, or ~~$0.25~~$0.50 per diluted share, and adjusted net income available to common stockholders of ~~$56.9~~$100.4 million, or ~~$0.29~~$0.52 per diluted share. ~~Our provision~~While we continue to operate in a low interest rate environment, for ~~credit losses expense was $56.6 million. As~~the second quarter of ~~June 30, 2020, our ACL was $365.5~~2021, we reported net interest income of $218.5 million, ~~which represented 1.64% of total loans.~~

~~At June 30, 2020, total portfolio loans were $22.3 billion,~~ an increase of ~~$855.1~~$5.2 million from December 31, 2019. We grew commercial loan balances by $1.1 billion relative to December 31, 2019. The increase in commercial loans was offset by $271.9 million in run-off of residential mortgage loans. Growth in commercial loans included $649.4 million of loans funded under the SBA PPP. At June 30, 2020, we had $1.7 billion of loans subject to pandemic-related payment deferral agreements.

~~STERLING BANCORP AND SUBSIDIARIES~~

Total deposits were $23.6 billion at June 30, 2020, an increase of $1.2 billion from December 31, 2019. Our loans to deposits ratio was 94.5% at quarter end. Our cost of interest-bearing deposits declined 39 basis points and our cost of total deposits declined 33 basis points relativecompared to the ~~linked quarter. In the six~~three months ended June 30, 2020. In the second quarter of 2021, as compared to the second quarter of 2020, ~~FHLB borrowings~~accretion income on acquired loans declined ~~$1.3 billion~~by $2.3 million, and ~~brokered deposits~~loan yields declined ~~$301.4 million. A portion of the decline in FHLB borrowings was replaced~~ by $568.3 million of borrowings under the PPP Liquidity Facility (“PPPLF”). The PPPLF is a facility with the FRB to extend credit to financial institutions, such as the Bank, that originate PPP loans. We anticipate the current interest rate environment and pricing strategies we have implemented will allow us to continue to meaningfully reduce the15 basis points, while our cost of ~~our total~~ funding ~~liabilities.~~

In the first six months of 2020, we repurchased 4,900,759 shares of common stock at a weighted average price of $16.53 per share, for total consideration of $81.0 million. Under our approved repurchase program, we have 6.7 million shares remaining for repurchase at June 30, 2020. We have temporarily suspended our share repurchase activity until the long-term impact of the pandemic becomes clearer.

~~Our net interest margin and net interest income were pressured~~liabilities declined by ~~the decrease in interest rates and its impact on our floating rate loans indexed to LIBOR and prime rates.~~43 basis points. Our tax equivalent net interest margin, excluding purchase accounting adjustments, ~~was 3.05%~~increased 25 basis points to 3.30% and our reported net interest margin on a tax equivalent basis was ~~3.20%. Our net interest income was $213.3 million, which was impacted by a decrease in accretion income on acquired loans~~3.42% an increase of ~~$13.7 million and a decrease in yields on our floating rate loans.~~22 basis points over the period ended June 30, 2020.

Our adjusted non-interest expenses were ~~$107.8~~$109.7 million in the second quarter of 2021, an increase of ~~$65 thousand~~$1.9 million over the quarter ended June 30, ~~2019. In~~2020. The increase was mainly due to increases in compensation, professional fees and information technology costs partially offset by lower foreclosed property expense, regulatory assessments and occupancy expenses. For the second quarter of 2020, we incurred $5.1 million of COVID-19 related expenses related to compensation, occupancy, foreclosed property and charitable contributions. As a result, we anticipate non-interest expenses will decline in the third quarter of 2020 relative to the second quarter. Our2021, our reported operating efficiency ratio was ~~52.2%~~48.5% and our adjusted operating efficiency ratio was ~~45.1%~~44.1%.

For the three months ended June 30, 2021, our provision for credit losses - loans expense was $6.0 million and our ACL - loans was $314.9 million, which represented 1.52% of total loans and 181.7% of non-performing loans. Net charge-offs in the ~~quarter.~~second quarter were $14.3 million.

At June 30, 2021, total portfolio loans were $20.7 billion, a decrease of $1.1 billion from December 31, 2020, which was mainly due to a $724.1 million decline in warehouse lending, the impact of $192.5 million in loan sales and pay downs of PPP loans amounting to $133.8 million. A slowdown in mortgage refinance activity was the primary driver of the decline in our mortgage warehouse balances while the low interest rate environment and heightened competition for earning assets has contributed to an increase in the level of pay downs in certain portfolios. Our loans to deposits ratio was 89.5% at quarter end.

Total deposits were $23.1 billion at June 30, 2021, an increase of $27.2 million from December 31, 2020. Our cost of total deposits declined four basis points relative to the linked quarter, while cost of interest-bearing deposits declined five basis points. In the six months ended June 30, 2021, FHLB and other short-term borrowings declined $382.0 million and brokered deposits declined $1.1 billion.

On April 1, 2021, we completed the previously announced redemption of Subordinated Notes - Bank with a principal balance of $145.0 million and coupon interest rate of 5.25%.

Critical Accounting Policies

Our accounting and reporting policies are prepared in accordance with GAAP and conform to general practices within the banking industry. ~~The preparation of~~Accounting policies considered critical to our financial ~~statements in conformity with GAAP requires management to make estimates and assumptions that affect~~results include the ~~amounts reported in the consolidated financial statements and accompanying notes. While we base estimates on historical experience, current information~~ACL - loans, accounting for goodwill and other ~~factors deemed to be relevant, actual results could differ from those estimates. We consider~~intangible assets and accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain; and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements. Accounting policies related to the ACL, business combinations, and deferred income ~~taxes are considered to be critical, as these policies involve considerable subjective judgment and estimation by management.~~taxes. For additional information ~~regarding critical~~on our significant accounting policies, ~~refer to~~see Note 1. “Basis of Financial Statement Presentation and Summary of Significant Accounting Policies” in the notes to consolidated financial statements included elsewhere in this report and the sections captioned “Critical Accounting Policies” and “Allowance for Loan Losses” in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the ~~2019~~2020 Form 10-K.

ACL - Loans. We consider the methodology for determining the ACL - loans to be a critical accounting policy due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could

STERLING BANCORP AND SUBSIDIARIES

result in changes to the amount of the ACL - loans considered necessary. The balance recorded for the allowance represents our estimate of the net amount not expected to be collected on portfolio loans at the balance sheet date. The ACL - loans is mainly comprised of reserves on individual assets estimated by our valuation models. Mortgage warehouse loans and certain consumer loans are evaluated on a pool level basis as each portfolio has common risk characteristics. Generally, all other portfolio loans are evaluated individually for expected credit loss. In addition to quantitative amounts as determined by our valuation models, we apply a qualitative factors overlay that incorporates trends and conditions and factors that the models may not fully capture in our judgement. Our methodologies for estimating the ACL - loans considers available relevant information about the collectibility of cash flows, including information about past events, current conditions and reasonable and supportable forecasts. ~~See Note 1.~~“Basis of Financial Statement Presentation - (e) Accounting Principle Change and Summary of Significant Accounting Policies” for further discussion of the risk factors we considered in the determination of the allowance for credit losses - loans.

Goodwill and Intangible Assets. We record goodwill as the excess of the purchase price in a business combination over the fair value of the identifiable net assets acquired in accordance with GAAP. Typically, we perform our annual intangible assets impairment test in the fourth quarter. Due to the impact of the pandemic, we performed the annual intangible assets impairment test during the ~~three months ended June 30,~~second quarter of 2020. We engaged an independent third-party to evaluate the fair value of the Company compared to its carrying value.

~~STERLING BANCORP AND SUBSIDIARIES~~

The results concluded that goodwill and intangible asset impairment did not exist. Fair value was estimated mainly using a discounted cash flow analysis. Significant assumptions included in the discounted cash flow analysis were the following:

•management financial projections for the period 2020 through 2024;

•earnings retention based on maintaining minimum tangible common capital ratio of 8.00%;

•operating expense cost savings estimated at 10.0%; and

•capitalization rate of 9.5% based on a 12.5% discount rate less estimated terminal growth of 3.0%.

See Note 6.5. “Goodwill and Other Intangible Assets” in the notes to consolidated financial statements included elsewhere in this report for additional information regarding our goodwill impairment test. We will continue to monitor and evaluate the impact of COVID-19, economic conditions and other triggering events that may indicate an impairment of goodwill in the future. In the event that we conclude that all or a portion of our goodwill or intangible assets are impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital ratios.

~~Financial Impact of Recent Acquisitions~~

The balances of the commercial loan portfolio acquired in the Woodforest Acquisition were included in our consolidated balance sheets as of February 28, 2019, and the operating results from those assets were included in our results of operations from that day forward.

STERLING BANCORP AND SUBSIDIARIES

The balances of the commercial loan portfolio acquired in the Santander Portfolio Acquisition were included in our consolidated balance sheets as of November 29, 2019, and the operating results from those assets were included in our results from operations from that day forward.

Selected financial condition data, statement of operations data, per share data, performance ratios, capital ratios, and asset quality data and ratios for the comparable periods are presented as follows:


	At or for the three months ended June 30,				At or for the six months ended June 30,
	2021		2020		2021		2020
End of period balances:
AFS and HTM securities, net	$	4,366,470	$	4,548,078	$	4,366,470	$	4,548,078
Portfolio loans	20,724,097		22,295,267		20,724,097		22,295,267
Total assets	29,143,918		30,839,893		29,143,918		30,839,893
Non-interest bearing deposits	5,963,828		5,407,728		5,963,828		5,407,728
Interest bearing deposits	17,182,883		18,192,893		17,182,883		18,192,893
Total deposits	23,146,711		23,600,621		23,146,711		23,600,621
Borrowings	518,021		2,014,259		518,021		2,014,259
Stockholders’ equity	4,722,856		4,484,187		4,722,856		4,484,187
Tangible common stockholders’ equity (“TCE”)1	2,817,138		2,561,599		2,817,138		2,561,599
Average balances:
AFS and HTM securities, net	$	4,322,126	$	4,630,056	$	4,189,290	$	4,838,315
Total loans2	20,843,661		21,940,636		21,067,859		21,573,406
Total assets	29,390,977		30,732,914		29,486,261		30,608,673
Non-interest bearing deposits	5,747,679		5,004,907		5,635,233		4,675,713
Interest bearing deposits	17,768,996		18,459,030		17,896,484		18,402,541
Total deposits and mortgage escrow	23,516,675		23,463,937		23,531,717		23,078,254
Borrowings	527,272		2,101,016		623,919		2,340,969
Stockholders’ equity	4,670,718		4,464,403		4,643,838		4,485,470
TCE1	2,762,292		2,538,842		2,733,420		2,557,700
Selected operating data:
Total interest and dividend income	$	230,310	$	253,226	$	464,157	$	526,753
Total interest expense	11,783		39,927		27,716		101,682
Net interest income	218,527		213,299		436,441		425,071
Provision for credit losses	5,250		56,606		15,250		194,886
Net interest income after provision for credit losses	213,277		156,693		421,191		230,185
Total non-interest income	30,214		26,090		62,570		73,416
Total non-interest expense	120,629		124,881		238,794		239,594
Income before income tax	122,862		57,902		244,967		64,007
Income tax expense (benefit)	24,523		7,110		47,478		(932)
Net income	98,339		50,792		197,489		64,939
Preferred stock dividend	1,959		1,972		3,922		3,948
Net income available to common stockholders	$	96,380	$	48,820	$	193,567	$	60,991

Per share data:
Reported basic EPS (GAAP)	$	0.50	$	0.25	$	1.01	$	0.31
Reported diluted EPS (GAAP)	0.50		0.25		1.01		0.31
Adjusted diluted EPS1 (non-GAAP)	0.52		0.29		1.02		0.28
Dividends declared per common share	0.07		0.07		0.14		0.14
Book value per share	23.80		22.35		23.80		22.35
Tangible book value per common share1	14.62		13.17		14.62		13.17

See legend on following page.

5544

STERLING BANCORP AND SUBSIDIARIES

At or for the three months ended June 30, At or for the six months ended June 30,
2020 2019 2020 2019
End of period balances:
Total securities $ 4,548,078 $ 5,858,865 $ 4,548,078 $ 5,858,865
Portfolio loans 22,295,267 20,370,306 22,295,267 20,370,306
Total assets 30,839,893 30,237,545 30,839,893 30,237,545
Non-interest bearing deposits 5,407,728 4,494,802 5,407,728 4,494,802
Interest bearing deposits 18,192,893 16,453,662 18,192,893 16,453,662
Total deposits 23,600,621 20,948,464 23,600,621 20,948,464
Borrowings 2,014,259 4,133,986 2,014,259 4,133,986
Stockholders’ equity 4,484,187 4,459,158 4,484,187 4,459,158
Tangible common stockholders’ equity (“TCE”)¹
2,561,599 2,543,399 2,561,599 2,543,399
Average balances:
Total securities $ 4,630,056 $ 5,883,269 $ 4,838,315 $ 6,107,734
Total loans²
21,940,636 19,912,839 21,573,406 20,161,178
Total assets 30,732,914 29,666,951 30,608,673 30,201,974
Non-interest bearing deposits 5,004,907 4,218,000 4,675,713 4,232,613
Interest bearing deposits 18,459,030 16,930,872 18,402,541 16,999,424
Total deposits and mortgage escrow 23,463,937 21,148,872 23,078,254 21,232,037
Borrowings 2,101,016 3,544,661 2,340,969 4,002,872
Stockholders’ equity 4,464,403 4,423,910 4,485,470 4,419,703
TCE¹
2,538,842 2,504,883 2,557,700 2,512,695
Selected operating data:
Total interest and dividend income $ 253,226 $ 302,457 $ 526,753 $ 611,857
Total interest expense 39,927 70,618 101,682 144,512
Net interest income 213,299 231,839 425,071 467,345
Provision for credit losses 56,606 11,500 194,886 21,700
Net interest income after provision for credit losses 156,693 220,339 230,185 445,645
Total non-interest income 26,090 27,058 73,416 46,655
Total non-interest expense 124,881 126,940 239,594 241,932
Income before income tax expense 57,902 120,457 64,007 250,368
Income tax (benefit) expense 7,110 23,997 (932) 52,471
Net income 50,792 96,460 64,939 197,897
Preferred stock dividend 1,972 1,987 3,948 3,976
Net income available to common stockholders $ 48,820 $ 94,473 $ 60,991 $ 193,921
Per share data:
Reported basic EPS (GAAP) $ 0.25 $ 0.46 $ 0.31 $ 0.92
Reported diluted EPS (GAAP) 0.25 0.46 0.31 0.92
Adjusted diluted EPS¹(non-GAAP)
0.29 0.51 0.28 1.01
Dividends declared per common share 0.07 0.07 0.14 0.14
Book value per share 22.35 21.06 22.35 21.06
Tangible book value per common share¹
13.17 12.40 13.17 12.40

~~See legend on following page.~~


	At or for the three months ended June 30,						At or for the six months ended June 30,
	2021			2020			2021			2020
Common shares outstanding:
Shares outstanding at period end	192,715,433			194,458,805			192,715,433			194,458,805
Weighted average shares basic	191,436,885			193,479,757			191,655,897			194,909,498
Weighted average shares diluted	192,292,989			193,604,431			192,456,817			195,168,557
Other data:
Full time equivalent employees at period end	1,491			1,617			1,491			1,617
Financial centers at period end	72			78			72			78
Performance ratios:
Return on average assets	1.32		%	0.64		%	1.32		%	0.40		%
Return on average equity	8.28			4.40			8.41			2.73
Reported return on average tangible assets1	1.40			0.68			1.41			0.42
Adjusted return on average tangible assets1	1.46			0.79			1.43			0.38
Reported return on average TCE1	13.99			7.73			14.28			4.78
Adjusted return on average TCE1	14.58			9.02			14.52			4.21
Reported operating efficiency1	48.5			52.2			47.9			48.1
Adjusted operating efficiency1	44.1			45.1			44.2			43.7
Net interest margin-GAAP	3.38			3.15			3.38			3.15
Net interest margin-tax equivalent3	3.42			3.20			3.43			3.20
Capital ratios (Company)4:
Tier 1 leverage ratio	10.91		%	9.51		%	10.91		%	9.51		%
Common equity Tier 1 capital ratio	12.43			11.00			12.43			11.00
Tier 1 risk-based capital ratio	13.02			11.57			13.02			11.57
Total risk-based capital ratio	15.92			14.20			15.92			14.20
Tangible equity to tangible assets	10.79			9.29			10.79			9.29
Tangible common equity to tangible assets1	10.29			8.82			10.29			8.82
Regulatory capital ratios (Bank)4:
Tier 1 leverage ratio	12.10		%	10.09		%	12.10		%	10.09		%
Tier 1 risk-based capital ratio	14.44			12.24			14.44			12.24
Total risk-based capital ratio	15.22			13.85			15.22			13.85
Asset quality data and ratios:
Allowance for credit - loans	$	314,873		$	365,489		$	314,873		$	365,489
Non-performing loans (“NPLs”)	173,319			260,605			173,319			260,605
Non-performing assets (“NPAs”)	174,135			269,270			174,135			269,270
Net charge-offs	14,313			17,561			27,227			24,516
NPAs to total assets	0.60		%	0.87		%	0.60		%	0.87		%
NPLs to total loans5	0.84			1.17			0.84			1.17
Allowance for loan losses to non-performing loans	181.67			140.25			181.67			140.25
Allowance for loan losses to total loans4	1.52			1.64			1.52			1.64
Annualized net charge-offs to average loans	0.28			0.32			0.26			0.24
__________________
1 See a reconciliation of as reported financial measures to as adjusted (non-GAAP) financial measures beginning on page 62 below under the caption “Supplemental Reporting of Non-GAAP Financial Measures.”
2 Includes loans held for sale but excludes the ACL.
3 Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 21%.
4 We elected the five-year capital phase-in option. The phase-in option is further discussed in Note 13. “Stockholders’ Equity - (a) Regulatory Capital Requirements” in the notes to consolidated financial statements included elsewhere in this report.
5 Total loans excludes loans held for sale.

5645

STERLING BANCORP AND SUBSIDIARIES

At or for the three months ended June 30, At or for the six months ended June 30,
2020 2019 2020 2019
Common shares outstanding:
Shares outstanding at period end 194,458,805 205,187,243 194,458,805 205,187,243
Weighted average shares basic 193,479,757 206,932,114 194,909,498 210,022,967
Weighted average shares diluted 193,604,431 207,376,239 195,168,557 210,419,425
Other data:
Full time equivalent employees at period end 1,617 1,820 1,617 1,820
Financial centers at period end 78 97 78 97
Performance ratios:
Return on average assets 0.64 % 1.28 % 0.40 % 1.29 %
Return on average equity 4.40 8.57 2.73 8.85
Reported return on average tangible assets¹
0.68 1.36 0.42 1.38
Adjusted return on average tangible assets¹
0.79 1.51 0.38 1.51
Reported return on average TCE¹
7.73 15.13 4.78 15.56
Adjusted return on average TCE¹
9.02 16.83 4.21 17.05
Reported operating efficiency¹
52.2 49.0 48.1 47.1
Adjusted operating efficiency¹
45.1 40.9 43.7 40.7
Net interest margin-GAAP 3.15 3.53 3.15 3.50
Net interest margin-tax equivalent³
3.20 3.58 3.20 3.56
Capital ratios (Company)⁴:
Tier 1 leverage ratio 9.51 % 9.57 % 9.51 % 9.57 %
Common equity Tier 1 capital ratio 11.00 11.52 11.00 11.52
Tier 1 risk-based capital ratio 11.57 12.15 11.57 12.15
Total risk-based capital ratio 14.20 13.30 14.20 13.30
Tangible equity to tangible assets 9.29 9.42 9.29 9.42
Tangible common equity to tangible assets¹
8.82 8.94 8.82 8.94
Regulatory capital ratios (Bank)⁴:
Tier 1 leverage ratio 10.09 % 9.98 % 10.09 % 9.98 %
Tier 1 risk-based capital ratio 12.24 12.67 12.24 12.67
Total risk-based capital ratio 13.85 13.94 13.85 13.94
Asset quality data and ratios:
Allowance for credit losses $ 365,489 $ 104,664 $ 365,489 $ 104,664
Non-performing loans (“NPLs”) 260,605 192,647 260,605 192,647
Non-performing assets (“NPAs”) 269,270 206,275 269,270 206,275
Net charge-offs 17,561 5,796 24,516 12,713
NPAs to total assets 0.87 % 0.68 % 0.87 % 0.68 %
NPLs to total loans⁵
1.17 0.95 1.17 0.95
Allowance for loan losses to non-performing loans 140.25 54.33 140.25 54.33
Allowance for loan losses to total loans⁴
1.64 0.51 1.64 0.51
Annualized net charge-offs to average loans 0.32 0.12 0.24 0.13

^{__________________}

¹~~See a reconciliation of as reported financial measures to as adjusted (non-GAAP) financial measures beginning on page~~ 73 ~~below under the caption “Supplemental Reporting of Non-GAAP Financial Measures.”~~

² ~~Includes loans held for sale but excludes the allowance for credit losses.~~

³ ~~Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 21%.~~

⁴~~We elected the five-year capital phase-in option effective~~ ~~June 30, 2020~~.

⁵ ~~Total loans excludes loans held for sale.~~

~~STERLING BANCORP AND SUBSIDIARIES~~

Results of Operations

For the three months ended June 30, ~~2020,~~2021, we reported net income available to common stockholders of $96.4 million, or $0.50 per diluted common share, compared to net income available to common stockholders of $48.8 million, or $0.25 per diluted common share, ~~compared to net income available to common stockholders of $94.5 million, or $0.46 per diluted common share,~~ for the three months ended June 30, ~~2019.~~2020.

Details of the changes in the various components of net income available to common stockholders are further discussed below.

Net Interest Income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing ~~89.1%~~87.9% and ~~89.5%~~89.1% of total revenue in the three months ended June 30, ~~2020~~2021 and ~~2019,~~June 30, 2020, respectively. Net interest margin is the ratio of taxable equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest bearing liabilities impact net interest income and net interest margin.

We are primarily funded by core deposits, which include transactional accounts for retail, commercial and municipal ~~transaction deposits,~~clients, money market and savings accounts and certificates of deposit accounts, including reciprocal brokered deposits, ~~through the Promontory Interfinancial Network,~~ but ~~excluding~~exclude other brokered and wholesale deposits. As of June 30, ~~2020,~~2021, we considered ~~92.8%~~97.7% of our total deposits to be core deposits compared to ~~95.0%~~92.8% at June 30, ~~2019.~~2020. The increase in core deposits was mainly due to the reclassification of one deposit relationship that met the “primary purpose” exception of the relevant guidance. See Note 6. “Deposits” for more information. Non-interest bearing demand deposits were ~~$5.4~~$6.0 billion of our total deposits at June 30, ~~2020,~~2021, compared to ~~$4.5~~$5.4 billion at June 30, ~~2019.~~2020.

The following tables set forth average balances, interest, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of the respective average balance of the particular loan type, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

5846

STERLING BANCORP AND SUBSIDIARIES


		For the three months ended June 30,																											For the three months ended June 30,
		2020												2019													2021				2020
		Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate			Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate
Interest earning assets:	Interest earning assets:															Interest earning assets:
Traditional C&I and commercial finance loans	Traditional C&I and commercial finance loans	$	8,791,024		$	84,192	3.85	%	$	7,203,215		$	97,260	5.42	%	Traditional C&I and commercial finance loans	$	8,269,192		$	76,983	3.73	%	$	8,791,024		$	84,192	3.85	%
CRE (includes multi-family)	CRE (includes multi-family)	10,404,643			106,408		4.11		9,486,333			115,759		4.89		CRE (includes multi-family)	10,331,355			103,225		4.01		10,404,643			106,408		4.11
ADC	ADC	519,517			5,762		4.46		307,290			4,664		6.09		ADC	645,094			6,650		4.13		519,517			5,762		4.46
Commercial loans	Commercial loans	19,715,184			196,362		4.01		16,996,838			217,683		5.14		Commercial loans	19,245,641			186,858		3.89		19,715,184			196,362		4.01
Consumer loans	Consumer loans	219,052			2,233		4.10		280,098			4,013		5.75		Consumer loans	170,965			1,712		4.02		219,052			2,233		4.10
Residential mortgage loans	Residential mortgage loans	2,006,400			21,309		4.25		2,635,903			36,587		5.55		Residential mortgage loans	1,427,055			13,115		3.68		2,006,400			21,309		4.25
Total gross loans¹	Total gross loans¹	21,940,636			219,904		4.03		19,912,839			258,283		5.20		Total gross loans1	20,843,661			201,685		3.88		21,940,636			219,904		4.03
Securities taxable	Securities taxable	2,507,384			18,855		3.02		3,453,858			24,632		2.86		Securities taxable	2,378,213			15,749		2.66		2,507,384			18,855		3.02
Securities non-taxable	Securities non-taxable	2,122,672			16,242		3.06		2,429,411			18,257		3.01		Securities non-taxable	1,943,913			14,833		3.05		2,122,672			16,242		3.06
Interest earning deposits	Interest earning deposits	455,626			146		0.13		289,208			1,295		1.80		Interest earning deposits	651,271			164		0.10		455,626			146		0.13
FRB and FHLB stock	FRB and FHLB stock	213,796			1,490		2.80		291,737			3,824		5.26		FRB and FHLB stock	151,877			994		2.63		213,796			1,490		2.80
Total securities and other earning assets	Total securities and other earning assets	5,299,478			36,733		2.79		6,464,214			48,008		2.98		Total securities and other earning assets	5,125,274			31,740		2.48		5,299,478			36,733		2.79
Total interest earning assets	Total interest earning assets	27,240,114			256,637		3.79		26,377,053			306,291		4.66		Total interest earning assets	25,968,935			233,425		3.61		27,240,114			256,637		3.79
Non-interest earning assets	Non-interest earning assets	3,492,800							3,289,898							Non-interest earning assets	3,422,042							3,492,800
Total assets	Total assets	$	30,732,914						$	29,666,951						Total assets	$	29,390,977						$	30,732,914
Interest bearing liabilities:	Interest bearing liabilities:															Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	$	4,766,298		$	4,806	0.41	%	$	4,399,296		$	11,884	1.08	%	Interest bearing demand deposits	$	4,964,386		$	1,614	0.13	%	$	4,766,298		$	4,806	0.41	%
Savingsdeposits²	Savingsdeposits²	2,890,402			2,418		0.34		2,448,132			1,883		0.31		Savings deposits2	2,777,651			531		0.08		2,890,402			2,418		0.34
Money market deposits	Money market deposits	8,035,750			11,711		0.59		7,538,890			23,020		1.22		Money market deposits	8,508,735			3,140		0.15		8,035,750			11,711		0.59
Certificates of deposit	Certificates of deposit	2,766,580			9,175		1.33		2,544,554			11,342		1.79		Certificates of deposit	1,518,224			1,413		0.37		2,766,580			9,175		1.33
Total interest bearing deposits	Total interest bearing deposits	18,459,030			28,110		0.61		16,930,872			48,129		1.14		Total interest bearing deposits	17,768,996			6,698		0.15		18,459,030			28,110		0.61
Senior Notes	Senior Notes	127,862			944		2.95		173,901			1,365		3.14		Senior Notes	—			—		—		127,862			944		2.95
Other borrowings	Other borrowings	1,528,844			5,684		1.50		3,197,738			18,768		2.35		Other borrowings	35,156			9		0.10		1,528,844			5,684		1.50
Subordinated Notes - Bank	Subordinated Notes - Bank	173,265			2,361		5.45		173,022			2,356		5.45		Subordinated Notes - Bank	—			—		—		173,265			2,361		5.45
Subordinated Notes - Company	Subordinated Notes - Company	271,045			2,828		4.17		—			—		—		Subordinated Notes - Company	492,116			5,076		4.13		271,045			2,828		4.17
Total borrowings	Total borrowings	2,101,016			11,817		2.26		3,544,661			22,489		2.54		Total borrowings	527,272			5,085		3.87		2,101,016			11,817		2.26
Total interest bearing liabilities	Total interest bearing liabilities	20,560,046			39,927		0.78		20,475,533			70,618		1.38		Total interest bearing liabilities	18,296,268			11,783		0.26		20,560,046			39,927		0.78
Non-interest bearing deposits	Non-interest bearing deposits	5,004,907							4,218,000							Non-interest bearing deposits	5,747,679							5,004,907
Other non-interest bearing liabilities	Other non-interest bearing liabilities	703,558							549,508							Other non-interest bearing liabilities	676,312							703,558
Total liabilities	Total liabilities	26,268,511							25,243,041							Total liabilities	24,720,259							26,268,511
Stockholders’ equity	Stockholders’ equity	4,464,403							4,423,910							Stockholders’ equity	4,670,718							4,464,403
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	30,732,914						$	29,666,951						Total liabilities and stockholders’ equity	$	29,390,977						$	30,732,914
Net interest rate spread³	Net interest rate spread³						3.01	%						3.28	%	Net interest rate spread3						3.35	%						3.01	%
Net interest earning assets⁴	Net interest earning assets⁴	$	6,680,068						$	5,901,520						Net interest earning assets4	$	7,672,667						$	6,680,068
Net interest margin - tax equivalent	Net interest margin - tax equivalent				216,710		3.20	%				235,673		3.58	%	Net interest margin - tax equivalent				221,642		3.42	%				216,710		3.20	%
Less tax equivalent adjustment	Less tax equivalent adjustment				(3,411)							(3,834)				Less tax equivalent adjustment				(3,115)							(3,411)
Net interest income	Net interest income				213,299							231,839				Net interest income				218,527							213,299
Accretion income on acquired loans	Accretion income on acquired loans				10,086							23,745				Accretion income on acquired loans				7,812							10,086
Tax equivalent net interest margin excluding accretion income on acquired loans	Tax equivalent net interest margin excluding accretion income on acquired loans				$	206,624	3.05	%				$	211,928	3.22	%	Tax equivalent net interest margin excluding accretion income on acquired loans				$	213,830	3.30	%				$	206,624	3.05	%
Ratio of interest earning assets to interest bearing liabilities	Ratio of interest earning assets to interest bearing liabilities	132.5		%					128.8		%					Ratio of interest earning assets to interest bearing liabilities	141.9		%					132.5		%

See legend on following page.

5947

STERLING BANCORP AND SUBSIDIARIES


		For the six months ended June 30,																											For the six months ended June 30,
		2020												2019													2021				2020
		Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate			Average balance			Interest		Yield/Rate		Average balance			Interest		Yield/Rate
Interest earning assets:	Interest earning assets:															Interest earning assets:
Traditional C&I and commercial finance loans	Traditional C&I and commercial finance loans	$	8,412,567		$	173,342	4.14	%	$	6,887,429		$	186,171	5.45	%	Traditional C&I and commercial finance loans	$	8,456,690		$	154,988	3.70	%	$	8,412,567		$	173,342	4.14	%
CRE (includes multi-family)	CRE (includes multi-family)	10,346,810			217,147		4.22		9,436,156			230,610		4.93		CRE (includes multi-family)	10,307,456			206,850		4.05		10,346,810			217,147		4.22
ADC	ADC	508,263			12,083		4.78		295,858			9,004		6.14		ADC	634,734			12,506		3.97		508,263			12,083		4.78
Commercial loans	Commercial loans	19,267,640			402,572		4.20		16,619,443			425,785		5.17		Commercial loans	19,398,880			374,344		3.89		19,267,640			402,572		4.20
Consumer loans	Consumer loans	226,347			5,173		4.60		287,721			8,110		5.68		Consumer loans	176,681			3,794		4.33		226,347			5,173		4.60
Residential mortgage loans	Residential mortgage loans	2,079,419			47,598		4.58		3,254,014			84,683		5.20		Residential mortgage loans	1,492,298			29,402		3.94		2,079,419			47,598		4.58
Total net loans¹		21,573,406			455,343		4.24		20,161,178			518,578		5.19
Total gross loans1																Total gross loans1	21,067,859			407,540		3.90		21,573,406			455,343		4.24
Securities taxable	Securities taxable	2,695,376			39,484		2.95		3,642,724			52,479		2.91		Securities taxable	2,241,749			31,101		2.80		2,695,376			39,484		2.95
Securities tax exempt	Securities tax exempt	2,142,939			32,693		3.05		2,465,010			37,063		3.01		Securities tax exempt	1,947,541			29,691		3.05		2,142,939			32,693		3.05
Interest earning deposits	Interest earning deposits	472,659			1,978		0.84		310,463			2,796		1.82		Interest earning deposits	649,733			313		0.10		472,659			1,978		0.84
FRB and FHLB stock	FRB and FHLB stock	225,808			4,120		3.67		313,399			8,724		5.61		FRB and FHLB stock	151,951			1,747		2.32		225,808			4,120		3.67
Total securities and other earning assets	Total securities and other earning assets	5,536,782			78,275		2.84		6,731,596			101,062		3.03		Total securities and other earning assets	4,990,974			62,852		2.54		5,536,782			78,275		2.84
Total interest earning assets	Total interest earning assets	27,110,188			533,618		3.96		26,892,774			619,640		4.65		Total interest earning assets	26,058,833			470,392		3.64		27,110,188			533,618		3.96
Non-interest earning assets	Non-interest earning assets	3,498,485							3,309,200							Non-interest earning assets	3,427,428							3,498,485
Total assets	Total assets	$	30,608,673						$	30,201,974						Total assets	$	29,486,261						$	30,608,673
Interest bearing liabilities:	Interest bearing liabilities:															Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	$	4,691,478		$	14,364	0.62	%	$	4,366,961		$	23,528	1.09	%	Interest bearing demand deposits	$	4,972,853		$	3,656	0.15	%	$	4,691,478		$	14,364	0.62	%
Savings deposits²	Savings deposits²	2,845,212			5,924		0.42		2,454,156			3,666		0.30		Savings deposits2	2,747,802			1,002		0.07		2,845,212			5,924		0.42
Money market deposits	Money market deposits	7,863,566			30,107		0.77		7,657,039			45,635		1.20		Money market deposits	8,445,983			6,953		0.17		7,863,566			30,107		0.77
Certificates of deposit	Certificates of deposit	3,002,285			23,496		1.57		2,521,268			21,294		1.70		Certificates of deposit	1,729,846			3,955		0.46		3,002,285			23,496		1.57
Total interest bearing deposits	Total interest bearing deposits	18,402,541			73,891		0.81		16,999,424			94,123		1.12		Total interest bearing deposits	17,896,484			15,566		0.18		18,402,541			73,891		0.81
Senior Notes	Senior Notes	150,592			2,378		3.18		176,655			2,777		3.17		Senior Notes	—			—		—		150,592			2,378		3.18
Other borrowings	Other borrowings	1,746,136			15,040		1.73		3,653,224			42,900		2.37		Other borrowings	60,416			44		0.15		1,746,136			15,040		1.73
Subordinated Notes - Bank	Subordinated Notes - Bank	173,234			4,718		5.45		172,993			4,712		5.45		Subordinated Notes - Bank	71,464			1,957		5.48		173,234			4,718		5.45
Subordinated Notes - Company	Subordinated Notes - Company	271,007			5,655		4.17		—			—		—		Subordinated Notes - Company	492,039			10,149		4.13		271,007			5,655		4.17
Total borrowings	Total borrowings	2,340,969			27,791		2.39		4,002,872			50,389		2.54		Total borrowings	623,919			12,150		3.93		2,340,969			27,791		2.39
Total interest bearing liabilities	Total interest bearing liabilities	20,743,510			101,682		0.99		21,002,296			144,512		1.39		Total interest bearing liabilities	18,520,403			27,716		0.30		20,743,510			101,682		0.99
Non-interest bearing deposits	Non-interest bearing deposits	4,675,713							4,232,613							Non-interest bearing deposits	5,635,233							4,675,713
Other non-interest bearing liabilities	Other non-interest bearing liabilities	703,980							547,362							Other non-interest bearing liabilities	686,787							703,980
Total liabilities	Total liabilities	26,123,203							25,782,271							Total liabilities	24,842,423							26,123,203
Stockholders’ equity	Stockholders’ equity	4,485,470							4,419,703							Stockholders’ equity	4,643,838							4,485,470
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	30,608,673						$	30,201,974						Total liabilities and stockholders’ equity	$	29,486,261						$	30,608,673
Net interest rate spread³	Net interest rate spread³						2.97	%						3.26	%	Net interest rate spread3						3.34	%						2.97	%
Net interest earning assets⁴	Net interest earning assets⁴	$	6,366,678						$	5,890,478						Net interest earning assets4	$	7,538,430						$	6,366,678
Net interest margin - tax equivalent	Net interest margin - tax equivalent				431,936		3.20	%				475,128		3.56	%	Net interest margin - tax equivalent				442,676		3.43	%				431,936		3.20	%
Less tax equivalent adjustment	Less tax equivalent adjustment				(6,865)							(7,783)				Less tax equivalent adjustment				(6,235)							(6,865)
Net interest income	Net interest income				425,071							467,345				Net interest income				436,441							425,071
Accretion income on acquired loans	Accretion income on acquired loans				20,772							49,325				Accretion income on acquired loans				16,084							20,772
Tax equivalent net interest margin excluding accretion income on acquired loans	Tax equivalent net interest margin excluding accretion income on acquired loans				$	411,164	3.05	%				$	425,803	3.19	%	Tax equivalent net interest margin excluding accretion income on acquired loans				$	426,592	3.30	%				$	411,164	3.05	%
Ratio of interest earning assets to interest bearing liabilities	Ratio of interest earning assets to interest bearing liabilities	130.7		%					128.0		%					Ratio of interest earning assets to interest bearing liabilities	140.7		%					130.7		%

¹Average balances include loans held for sale and non-accrual loans. Includes the effect of net deferred loan origination fees, amortization of premiums, accretion of discounts and costs and non-accrual loans. Interest includes prepayment fees and late charges.

²Includes club accounts and interest bearing mortgage escrow balances.

6048

STERLING BANCORP AND SUBSIDIARIES

³Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.

⁴Net interest earning assets represents total interest earning assets less total interest bearing liabilities.

The following table presents the dollar amount of changes in interest income (on a fully tax equivalent basis) and interest expense for the major categories of our interest earning assets and interest bearing liabilities for the periods indicated. Information is provided for each category of interest earning assets and interest bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior period average rate); and (ii) changes attributable to changes in rate (i.e., changes in average rate multiplied by prior period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.


		For the three months ended June 30,											For the three months ended June 30,
		2020 vs. 2019											2021 vs. 2020
		Increase / (Decrease) due to								Total increase /	Increase / (Decrease) due to				Total increase /
		Volume		Rate		(decrease)			Volume		Rate		(decrease)
Interest earning assets:	Interest earning assets:							Interest earning assets:
Traditional C&I and commercial finance loans	Traditional C&I and commercial finance loans	$	18,654	$	(31,722)	$	(13,068)	Traditional C&I and commercial finance loans	$	(4,727)	$	(2,482)	$	(7,209)
CRE (includes multi-family)	CRE (includes multi-family)	10,365		(19,716)		(9,351)		CRE (includes multi-family)	(717)		(2,466)		(3,183)
ADC	ADC	2,586		(1,488)		1,098		ADC	1,334		(446)		888
Commercial loans	Commercial loans	31,605		(52,926)		(21,321)		Commercial loans	(4,110)		(5,394)		(9,504)
Consumer loans	Consumer loans	(769)		(1,011)		(1,780)		Consumer loans	(478)		(43)		(521)
Residential mortgage loans	Residential mortgage loans	(7,713)		(7,565)		(15,278)		Residential mortgage loans	(5,596)		(2,598)		(8,194)
Total loans	Total loans	23,123		(61,502)		(38,379)		Total loans	(10,184)		(8,035)		(18,219)
Securities taxable	Securities taxable	(7,080)		1,303		(5,777)		Securities taxable	(937)		(2,169)		(3,106)
Securities tax exempt	Securities tax exempt	(2,315)		300		(2,015)		Securities tax exempt	(1,356)		(53)		(1,409)
Interest earning deposits	Interest earning deposits	480		(1,629)		(1,149)		Interest earning deposits	56		(38)		18
FRB and FHLB stock	FRB and FHLB stock	(849)		(1,485)		(2,334)		FRB and FHLB stock	(410)		(86)		(496)
Total interest earning assets	Total interest earning assets	13,359		(63,013)		(49,654)		Total interest earning assets	(12,831)		(10,381)		(23,212)
Interest bearing liabilities:	Interest bearing liabilities:							Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	898		(7,976)		(7,078)		Interest bearing demand deposits	198		(3,390)		(3,192)
Savingsdeposits¹	Savingsdeposits¹	348		187		535		Savings deposits1	(92)		(1,795)		(1,887)
Money market deposits	Money market deposits	1,393		(12,702)		(11,309)		Money market deposits	664		(9,235)		(8,571)
Certificates of deposit	Certificates of deposit	926		(3,093)		(2,167)		Certificates of deposit	(2,985)		(4,777)		(7,762)
Total interest bearing deposits	Total interest bearing deposits	3,565		(23,584)		(20,019)		Total interest bearing deposits	(2,215)		(19,197)		(21,412)
Senior Notes	Senior Notes	(343)		(78)		(421)		Senior Notes	(472)		(472)		(944)
Other borrowings	Other borrowings	(7,734)		(5,350)		(13,084)		Other borrowings	(2,788)		(2,887)		(5,675)
Subordinated Notes - Bank	Subordinated Notes - Bank	5		—		5		Subordinated Notes - Bank	(1,181)		(1,180)		(2,361)
Subordinated Notes - Company	Subordinated Notes - Company	—		2,828		2,828		Subordinated Notes - Company	2,275		(27)		2,248
Total borrowings	Total borrowings	(8,072)		(2,600)		(10,672)		Total borrowings	(2,166)		(4,566)		(6,732)
Total interest bearing liabilities	Total interest bearing liabilities	(4,507)		(26,184)		(30,691)		Total interest bearing liabilities	(4,381)		(23,763)		(28,144)
Change in tax equivalent net interest income	Change in tax equivalent net interest income	17,866		(36,829)		(18,963)		Change in tax equivalent net interest income	(8,450)		13,382		4,932
Less tax equivalent adjustment	Less tax equivalent adjustment	(423)		—		(423)		Less tax equivalent adjustment	(343)		47		(296)
Change in net interest income	Change in net interest income	$	18,289	$	(36,829)	$	(18,540)	Change in net interest income	$	(8,107)	$	13,335	$	5,228

______________________

¹ Includes club accounts and interest bearing mortgage escrow balances.

6149

STERLING BANCORP AND SUBSIDIARIES


		For the six months ended June 30,											For the six months ended June 30,
		2020 vs. 2019											2021 vs. 2020
		Increase / (Decrease) due to								Total increase /	Increase / (Decrease) due to				Total increase /
		Volume		Rate		(decrease)			Volume		Rate		(decrease)
Interest earning assets:	Interest earning assets:							Interest earning assets:
Traditional C&I and commercial finance loans	Traditional C&I and commercial finance loans	$	36,874	$	(49,703)	$	(12,829)	Traditional C&I and commercial finance loans	$	863	$	(19,217)	$	(18,354)
CRE (includes multi-family)	CRE (includes multi-family)	21,333		(34,796)		(13,463)		CRE (includes multi-family)	(889)		(9,408)		(10,297)
ADC	ADC	5,411		(2,332)		3,079		ADC	2,681		(2,258)		423
Commercial loans	Commercial loans	63,618		(86,831)		(23,213)		Commercial loans	2,655		(30,883)		(28,228)
Consumer loans	Consumer loans	(1,553)		(1,384)		(2,937)		Consumer loans	(1,088)		(291)		(1,379)
Residential mortgage loans	Residential mortgage loans	(27,877)		(9,208)		(37,085)		Residential mortgage loans	(12,172)		(6,024)		(18,196)
Total loans	Total loans	34,188		(97,423)		(63,235)		Total loans	(10,605)		(37,198)		(47,803)
Securities taxable	Securities taxable	(13,719)		724		(12,995)		Securities taxable	(6,438)		(1,945)		(8,383)
Securities tax exempt	Securities tax exempt	(4,428)		58		(4,370)		Securities tax exempt	(3,002)		—		(3,002)
Interest earning deposits	Interest earning deposits	1,087		(1,905)		(818)		Interest earning deposits	538		(2,203)		(1,665)
FRB and FHLB stock	FRB and FHLB stock	(2,058)		(2,546)		(4,604)		FRB and FHLB stock	(1,117)		(1,256)		(2,373)
Total interest earning assets	Total interest earning assets	15,070		(101,092)		(86,022)		Total interest earning assets	(20,624)		(42,602)		(63,226)
Interest bearing liabilities:	Interest bearing liabilities:							Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	1,653		(10,818)		(9,165)		Interest bearing demand deposits	818		(11,526)		(10,708)
Savingsdeposits¹	Savingsdeposits¹	643		1,615		2,258		Savings deposits1	(194)		(4,728)		(4,922)
Money market deposits	Money market deposits	1,204		(16,732)		(15,528)		Money market deposits	2,052		(25,206)		(23,154)
Certificates of deposit	Certificates of deposit	3,899		(1,697)		2,202		Certificates of deposit	(7,324)		(12,217)		(19,541)
Total interest bearing deposits	Total interest bearing deposits	7,399		(27,632)		(20,233)		Total interest bearing deposits	(4,648)		(53,677)		(58,325)
Senior Notes	Senior Notes	(417)		18		(399)		Senior Notes	(1,189)		(1,189)		(2,378)
Other borrowings	Other borrowings	(18,432)		(9,427)		(27,859)		Other borrowings	(7,795)		(7,201)		(14,996)
Subordinated Notes - Bank	Subordinated Notes - Bank	6		—		6		Subordinated Notes - Bank	(2,787)		26		(2,761)
Subordinated Notes - Company	Subordinated Notes - Company	—		5,655		5,655		Subordinated Notes - Company	4,548		(54)		4,494
Total borrowings	Total borrowings	(18,843)		(3,754)		(22,597)		Total borrowings	(7,223)		(8,418)		(15,641)
Total interest bearing liabilities	Total interest bearing liabilities	(11,444)		(31,386)		(42,830)		Total interest bearing liabilities	(11,871)		(62,095)		(73,966)
Change in tax equivalent net interest income	Change in tax equivalent net interest income	26,514		(69,706)		(43,192)		Change in tax equivalent net interest income	(8,753)		19,493		10,740
Less tax equivalent adjustment	Less tax equivalent adjustment	(917)		—		(917)		Less tax equivalent adjustment	(719)		89		(630)
Change in net interest income	Change in net interest income	$	27,431	$	(69,706)	$	(42,275)	Change in net interest income	$	(8,034)	$	19,404	$	11,370

Tax equivalent net interest income decreased $19.0 million for the three months ended June 30, 2020, compared to the three months ended June 30, 2019. The decrease was mainly due to lower yield on interest earning assets, which was due to a decline in market rates of interest______________________

1Includes club accounts and accretion income on acquired loans. For the three months ended June 30, 2020, total interest earning assets yielded 3.79% compared to 4.66% during 2019. Average interest earning assets increased by $863.1 million between the periods, which was mainly due to the growth of commercial loans that was partially offset by continued payoff of residential loans and sale and repayment of investment securities. The tax equivalent net interest margin decreased 38 basis points to 3.20% in the second quarter of 2020 from 3.58% in the second quarter of 2019. The percentage of loans to average earning assets increased to 80.5% compared to 75.5% in 2019. The cost of interest bearing ~~liabilities declined to 0.78% compared to 1.38% in 2019, which was mainly due to lower market rates of interest and reduction of higher cost wholesale borrowings.~~mortgage escrow balances.

Tax equivalent net interest income increased $4.9 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020. This was mainly a result of lower interest expense, which declined in line with lower market interest rates and as a result of changes in our funding mix. Over the course of 2020 and during the first half of 2021, we have continued to reprice deposit relationships and have repaid higher costing FHLB and other borrowings. As a result, interest expense declined by 70.5% over the prior year quarter, while tax equivalent interest and dividend income declined by 9.0% over the same period. For the three months ended June 30, 2021, total interest earning assets yielded 3.61% compared to 3.79% during the same period in 2020. The cost of interest bearing liabilities declined to 0.26% in the second quarter of 2021 compared to 0.78% in the same period in 2020. The tax equivalent net interest margin increased 22 basis points to 3.42% in the second quarter of 2021 from 3.20% in the second quarter of 2020. The percentage of average loans to average earning assets decreased ~~$43.2~~to 80.3% compared to 80.5% in 2020.

STERLING BANCORP AND SUBSIDIARIES

Tax equivalent net interest income increased $10.7 million to $442.7 million for the six months ended June 30, 2021, compared to $431.9 million for the six months ended June 30, 2020, ~~compared to $475.1 million for the six months ended June 30, 2019. The decrease was mainly due to~~largely as a result of the same factors as discussed above. The tax equivalent net interest margin ~~decreased~~increased to 3.43% for the six months ended June 30, 2021 from 3.20% in the six months ended June 30, 2020. The yield on interest earning assets was 3.64% compared to 3.96% for the six months ended June 30, 2020, ~~from 3.56% in the six months ended June 30, 2019. The yield on interest earning assets was 3.96% compared to 4.65% for the six months ended June 30, 2019,~~ which was mainly due to changes in market interest rates ~~of interest~~ and lower accretion income. The percentage of loans to average earning assets increased to ~~79.6%~~

~~STERLING BANCORP AND SUBSIDIARIES~~

80.8% for the six months ended June 30, ~~2020~~2021, compared to ~~75.0%~~79.6% for the six months ended June 30, ~~2019.~~2020. The cost of interest bearing liabilities declined to 0.30% for the six months ended June 30, 2021 compared to 0.99% for the six months ended June 30, 2020, ~~compared~~which was mainly due to ~~1.39%~~the same factors described above.

Average interest earning assets decreased by $1.3 billion between the three month periods ended June 30, 2021 and 2020. Average interest earning assets decreased by $1.1 billion between the six months periods ended June 30, 2021 and 2020. The decline was mainly due to net sales and repayments of investment securities and continued runoff in our residential mortgage loan portfolio.

The average balance of commercial loans decreased $469.5 million for the ~~six~~three months ended June 30, ~~2019.~~2021, compared to the three months ended June 30, 2020. The decrease was mainly due to loan sales and repayments of PPP loans, a decline in our mortgage warehouse balances, and net repayments from traditional C&I, ABL, and multifamily portfolios. The average yield on commercial loans declined to 3.89% compared to 4.01% in the prior year period. The decrease in the yield on commercial loans was in line with declines in market interest rates as well as a decline in accretion income on acquired loans. Accretion income on acquired commercial loans declined to $6.4 million for the three months ended June 30, 2021 compared to $7.4 million in the corresponding prior year quarter.

The average balance of loans outstanding ~~increased $2.0 billion for~~decreased $505.5 million in the ~~three~~six months ended June 30, 2021, compared to the six months ended June 30, 2020, ~~compared~~mainly due to the ~~three months ended June 30, 2019. The increase was due to loans originated by our commercial banking teams, which included $377.7 million of PPP loans and two portfolio acquisitions,~~same factors as discussed ~~in Note 2. “Acquisitions”. The average balance of commercial loans increased $2.7 billion between the periods.~~above. The average yield on loans was ~~4.03%~~3.90% in the six months ended June 30, 2021 compared to ~~5.20%~~4.24% in the comparable year ago period. The decrease ~~in the yield on loans~~ was mainly due to ~~the change~~declines in market rates of interest and athe decline in accretion income on acquired commercial loans ~~which was $10.1 million compared to $23.7 million in 2019.~~

~~The average balance of loans outstanding increased $1.4 billion in~~for the six months ended June 30, ~~2020,~~2021 to $12.8 million compared to ~~the six months ended June 30, 2019, as the growth in average balance of commercial loans was greater than the decline~~$15.0 million in the ~~average balance of residential mortgage and consumer loans. The average yield on loans was 4.24% in the six months ended June 30, 2020 compared to 5.19% in the comparable~~ year ago ~~period. The decline in yield on loans was due to the same factors as for the three-month~~ period.

Interest income on traditional C&I and commercial finance loans decreased ~~$13.1~~$7.2 million for the three months ended June 30, ~~2020,~~2021, compared to the three months ended June 30, ~~2019.~~2020. The yield on traditional C&I and commercial finance loans declined to ~~3.85%~~3.73% compared to ~~5.42%~~3.85% in ~~2019. The~~the corresponding prior year period. In addition to the decrease in ~~yield was due to a change in the mix of business,~~market interest rates, interest income on traditional C&I and commercial finance loans declined as lower yielding mortgage warehouse and public sector finance loans represented a ~~substantial portion~~larger percentage of ~~the increase~~total traditional C&I and commercial finance loans in ~~average balances between the periods, the decrease~~2021 than in ~~market interest rates, and lower accretion income.~~2020.

Interest income on traditional C&I and commercial finance loans decreased ~~$12.8~~$18.4 million and was $155.0 million in the six months ended June 30, 2021 compared to $173.3 million infor the six months ended June 30, 2020. This decrease was mainly due to the same factors as ~~for the three-month period.~~discussed above. The yield on traditional C&I and commercial finance loans decreased to ~~4.14%~~3.70% compared to ~~5.45%~~4.14% in the six months ended June 30, ~~2019.~~2020.

Interest income on CRE loans and multi-family loans decreased ~~$9.4~~$3.2 million to $103.2 million for the three months ended June 30, ~~2020,~~2021 compared to $106.4 million for the three months ended June 30, ~~2019.~~2020. The ~~average balance~~decrease was mainly due to repayments of ~~CRE and~~broker originated multi-family loans ~~increased $918.3 million between the periods.~~and declines in market rates of interest. The yield on CRE and multi-family loans was ~~4.11% compared to 4.89%~~4.01% for the three months ended June 30, ~~2019. The decrease~~2021 compared to 4.11% in ~~yield was mainly due to a change in market interest rates, lower accretion income and lower levels of prepayment penalties.~~the three months ended June 30, 2020.

Interest income on CRE loans and multi-family loans decreased ~~$13.5~~$10.3 million to $206.9 million in the six months ended June 30, 2021 compared to $217.1 million infor the six months ended June 30, 2020. The yield on CRE and multi-family loans was 4.05% in the six months ended June 30, 2021 compared to 4.22% in the six months ended June 30, ~~2020 compared to 4.93% in the six months ended June 30, 2019.~~2020. The decrease in yield was mainly due to the ~~same factors discussed~~change in market rates of interest and the ~~three-month period.~~increase in lower yielding CRE loans, which replaced the majority of the multi-family run off.

Interest income on residential mortgage loans declined ~~$15.3~~$8.2 million for the three months ended June 30, ~~2020,~~2021, compared to the three months ended June 30, ~~2019.~~2020. The decrease was mainly due to a ~~$629.5 million~~decline in average balances and a 57 basis point decline in the ~~average balance~~yield, a result of residential mortgage loans, which was driven by the residential mortgage loan sale completed in 2019 and continued run-off of the portfolio. The yield on residential mortgage loans decreased 130 basis points to 4.25%. The decline in yield was mainly due to lower accretion income on acquired residential mortgage loans, which was $2.4 million compared to $8.4 million in 2019. The decline in yield was also due to adjustable rate loans repricing to market rates of ~~interest.~~interest and lower accretion income on acquired loans, which was $1.2 million in the three months ended June 30, 2021 compared to $2.4 million in the prior year period. The average balance of residential mortgage loans declined $579.3 million, mainly due to continued run-off as well as the sale of certain residential mortgage loans in 2020.

Interest income on residential mortgage loans decreased ~~$37.1~~$18.2 million to $29.4 million in the six months ended June 30, 2021 compared to $47.6 million infor the six months ended June 30, 2020. The decrease was mainly due to a ~~$1.2 billion~~$587.1 million decline in the average balance of residential mortgage loans resulting from elevated levels of pay downs as well as a result of the loan sales ~~and continued run-off.~~in 2020. The yield on residential mortgage loans ~~declined~~decreased to ~~4.58%~~3.94% compared to ~~5.20%~~4.58% for the six months ended June 30, ~~2019. The yield on residential mortgage loans declined due to changes in market rates of interest on adjustable mortgage loans and lower accretion~~2020. Accretion income on

STERLING BANCORP AND SUBSIDIARIES

acquired residential mortgage loans ~~which~~ was $2.9 million for the six months ended June 30, 2021 compared to $5.3 million for the six months ended June 30, ~~2020 compared to $16.5 million for the six months ended June 30, 2019.~~2020.

Tax equivalent interest income on securities decreased ~~$7.8~~$4.5 million for the three months ended June 30, ~~2020. This was~~2021, compared to the three months ended June 30, 2020, mainly ~~the result of~~due to a decrease of ~~$1.3 billion~~$307.9 million in ~~the~~ average ~~balance of~~ securities between the periods. The decline in balances was mainly due to ~~sales of lower yielding securities and~~ accelerated ~~repayments~~repayment of mortgage-backed securities. The tax equivalent yield on securities ~~increased~~decreased to 2.84% compared to 3.05% ~~compared to 2.92%~~ in ~~2019.~~the prior year period. The ~~increase~~decrease in tax equivalent yield was mainly due to ~~sales~~deployment of ~~lower yielding~~excess cash at the Federal Reserve Bank into US Treasury securities and continued pay downs in our municipal securities ~~in 2019.~~portfolio. The average balance of tax-exempt securities declined to $1.9 billion for the three months ended June 30, 2021, compared to $2.1 billion ~~compared to $2.4 billion.~~for the corresponding period in 2020.

Tax equivalent interest income on securities decreased ~~$17.4~~$11.4 million to $60.8 million in the six months ended June 30, 2021, compared to $72.2 million infor the six months ended June 30, 2020. This was mainly the result of a decrease of ~~$1.3 billion~~$649.0 million in the average balance of securities between the periods. The tax equivalent yield on

~~STERLING BANCORP AND SUBSIDIARIES~~

securities was 2.93% in the six months ended June 30, 2021, compared to 3.00% in the six months ended June 30, ~~2020, compared to 2.96%~~2020. The decrease in ~~the six months ended June 30, 2019. The change in average balance and~~tax equivalent yield ison securities was mainly due to the same factors as discussed in respect of the three month period.

Average interest earning deposits were $651.3 million for the ~~three-month period.~~three months ended June 30, 2021, an increase of $195.6 million compared to the three months ended June 30, 2020. The increase was due to deposit inflows and lower than anticipated loan demand. Interest earning deposits yielded 0.10% for the three months ended June 30, 2021, compared to 0.13% for the same period in 2020.

Average total deposits and mortgage escrow balances increased ~~$2.3 billion~~$52.7 million to $23.5 billion in the three months ended June 30, 2021 compared to the second quarter of 2020. Average interest bearing deposits ~~increased $1.5 billion~~decreased $690.0 million and average non-interest bearing deposits increased ~~by $786.9~~$742.8 million. The increase in deposits was mainly due to ~~the success of our deposit gathering strategies, which included digital channels~~growth in commercial, consumer and ~~increasing penetration in our marketplace of commercial and municipal deposit relationships. In addition,~~on-line deposits coupled with higher cash balances held by many of our ~~clients held higher deposit balances than normal as a result of the pandemic.~~clients. The average cost of interest bearing deposits was ~~0.61%~~0.15% in the second quarter of 2021 compared to ~~1.14%.~~0.61% in the second quarter of 2020. The average cost of total deposits was ~~0.48% compared to 0.91%~~0.11% in the second quarter of ~~2019.~~2021 compared to 0.48% in the second quarter of 2020. The decrease in the cost of deposits was mainly due to repricing of deposit relationships in line with declines in market interest rates.

Average total deposits and mortgage escrow ~~balances~~ increased ~~$1.8~~$453.5 million to $23.5 billion in the six months ended June 30, 2021, compared to $23.1 billion in the six months ended June 30, 2020. ~~Average~~Over the same period, average interest bearing deposits decreased $506.1 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Average non-interest bearing deposits increased ~~$1.4~~$959.5 million to $5.6 billion in the six months ended June 30, ~~2020~~2021, compared ~~to the six months ended June 30, 2019. Average non-interest bearing deposits increased $443.1 million~~ to $4.7 billion in the six months ended June 30, 2020. ~~These increases were~~The increase was mainly due to ~~the same factors as discussed above.~~organic growth generated by our commercial banking teams and financial centers. The average cost of interest bearing deposits was 0.18% in the six months ended June 30, 2021 compared to 0.81% in the six months ended June 30, ~~2020 compared to 1.12%~~2020. The average cost of total deposits was 0.13% in the six months ended June 30, ~~2019. The average cost of total deposits was~~2021 compared to 0.64% in the six months ended June 30, ~~2020 compared to 0.89% in the six months ended June 30, 2019.~~2020. The decrease in the cost of deposits was mainly due to the same factors discussed above.

Average borrowings declined ~~$1.4~~$1.6 billion in the three months ended June 30, ~~2020,~~2021, compared to the same period a year ago. ~~The decrease was mainly~~Given the ~~result of an~~ increase in deposits and athe decline in ~~residential mortgage~~our loan ~~balances~~portfolio and in investment securities between the periods, ~~as proceeds from repayments and sales of assets were~~excess liquidity was used ~~mainly~~ to reduce borrowings. The average cost of borrowings was ~~2.26%~~3.87% for the second quarter of ~~2020,~~2021, compared to ~~2.54%~~2.26% in ~~2019.~~the prior year period. The increase in the average cost of borrowings was a result of changes in funding mix, with a greater proportion of our borrowings comprised of longer term and more expensive subordinated notes in 2021, compared to 2020.

Average borrowings decreased $1.7 billion to ~~$2.3 billion~~$623.9 million in the six months ended June 30, ~~2020,~~2021, compared to ~~$4.0~~$2.3 billion in the same period a year ago. The decrease in average borrowings was due to the same factors as discussed in the ~~three-month~~three month period. The average cost of borrowings was ~~2.39%~~3.93% for the six months ended June 30, ~~2020~~2021 compared to ~~2.54%~~2.39% in the six months ended June 30, ~~2019.~~2020. The ~~decrease~~increase was mainly due to the same factors as discussed in the ~~three-month~~three month period.

Provision for Credit Losses - Loans. The provision for credit losses - loans is determined as the amount to be added to the ACL - loans after net charge-offs have been deducted to bring the allowance to a level that is our best estimate of the net amount not expected to be collected on portfolio loans. For the three months ended June 30, ~~2020~~2021 and June 30, ~~2019, the provision for credit losses - loans was$56.6 million and $11.5 million, respectively. For the six months ended June 30,~~ 2020, ~~and June 30, 2019,~~ the provision for credit losses - loans was ~~$193.2~~$6.0 million and ~~$21.7~~$56.6 million, respectively. See the section captioned “Non-Performing Loans and Non-Performing Assets” later in this discussion for further analysis of the provision for credit ~~losses.~~losses - loans.

Provision for Credit Losses - HTM Securities. ~~The~~In the second quarter of 2021, we recorded a $750 thousand reduction in our provision for credit losses - HTM securities ~~for~~with no similar provision recorded in the ~~three and~~second quarter of 2020. In the six ~~month periods~~months ended June 30,

STERLING BANCORP AND SUBSIDIARIES

2020, ~~was $0, and~~we recorded a provision for credit losses - HTM securities of $1.7 ~~million, respectively.~~million. The ~~ACL~~provision for credit losses - HTM securities is based on our estimate of loss given anticipated ~~defaults due to COVID-19~~defaults. Based on our modeling of expected credit losses for municipal and ~~deterioration~~corporate securities, which reflected lower expected losses, we reduced the ACL - HTM securities in ~~economic conditions.~~the period.

~~STERLING BANCORP AND SUBSIDIARIES~~

Non-interest income. The components of non-interest income were as follows for the periods presented below:


		For the three months ended						For the six months ended							For the three months ended				For the six months ended
		June 30,						June 30,							June 30,				June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Deposit fees and service charges	Deposit fees and service charges	$	5,345	$	7,098	$	11,968	$	13,310	Deposit fees and service charges	$	7,096	$	5,345	$	13,659	$	11,968
Accounts receivable management / factoring commissions and other fees	Accounts receivable management / factoring commissions and other fees	4,419		5,794		9,956		11,217		Accounts receivable management / factoring commissions and other fees	5,491		4,419		10,917		9,956
Bank owned life insurance	Bank owned life insurance	4,950		4,192		9,967		7,833		Bank owned life insurance	4,981		4,950		9,936		9,967
Loan commissions and fees	Loan commissions and fees	8,003		5,308		19,028		9,146		Loan commissions and fees	8,762		8,003		19,239		19,028
Investment management fees	Investment management fees	1,379		2,050		3,225		3,950		Investment management fees	2,018		1,379		3,870		3,225
Net gain (loss) on sale of securities		485		(528)		8,896		(13,712)
Net gain on called securities		—		—		4,880		—
Net gain on sale of securities										Net gain on sale of securities	—		485		706		8,896
Net (loss) gain on called securities										Net (loss) gain on called securities	(80)		—		(67)		4,880

Gain on sale of residential mortgage loans		—		—		—		8,313

Other	Other	1,509		3,144		5,496		6,598		Other	1,946		1,509		4,310		5,496
Total non-interest income	Total non-interest income	$	26,090	$	27,058	$	73,416	$	46,655	Total non-interest income	$	30,214	$	26,090	$	62,570	$	73,416

Non-interest income was ~~$26.1~~$30.2 million for the three months ended June 30, ~~2020,~~2021, compared to ~~$27.1~~$26.1 million in the same period a year ago. Generally, unless otherwise stated below, the change in non-interest income for the three months ended June 30, 2020, compared to the three months ended June 30, 2019 was due to the same factors as between the six month periods.

Deposit fees and service charges ~~were $5.3~~increased $1.8 million ~~for~~compared to the second quarter of ~~2020, which represented a $1.8 million decrease from the second quarter of 2019, which~~2020. This was mainly due to ~~lower~~higher transaction ~~volume as~~volumes, higher analysis charges and, an increase in wire fees and check printing. In the six months ended June 30, 2021, deposit fees and charges increased $1.7 million compared to the same period a ~~result~~year ago. The increase was mainly due to increased transaction volumes compared to the same periods a year ago which were impacted by the onset of the pandemic.

~~Bank owned life insurance~~Accounts receivable management / factoring commissions and other fees ~~(“BOLI”) income represents the change in the cash surrender value of life insurance policies owned by us. BOLI income was $5.0~~increased $1.1 million ~~for~~compared to the second quarter of 2020 and $961 thousand in the six months ended June 30, 2021. The increase was mainly due to a rebound in transaction volume in our factoring and payroll finance businesses as compared to ~~$4.2 million in~~ the ~~same period a~~ year ago. Between the two periods, in the second half of 2019 we restructured the BOLI acquired in the merger with Astoria Financial Corporation (the “Astoria Merger”) by reinvesting the assets into securities that have a better risk adjusted return profile.ago periods.

Loan commissions and fee income includes fees on lines of credit, loan servicing fees, loan syndication fees, collateral monitoring, and other loan related fees that are not included in interest income. ~~Loan commissions and fees were $8.0 million for the three months ended June 30, 2020, compared to $5.3 million for the three months ended June 30, 2019.~~ The increase was mainly due to fee income earned on operating leases of $3.8 million. Operating leases were acquired in the Santander portfolio acquisition that we completed in November 2019, which is discussed in Note 2. “Acquisitions.” In the six-monthsix month period ended June 30, ~~2020,~~2021 included referral fees earned in the first quarter on second round PPP loans of $1.8 million. In the year ago period loan fees also included gain on sale of equipment finance loans of $2.9 million.

~~When we analyze~~ Excluding these items, the ~~results of our non-interest income, we exclude certain items, including gains and losses on sales of securities and~~increase in the ~~gain on sale of residential mortgage loans. Excluding net gain (loss) on sale of securities, non-interest income~~six month period was ~~$25.6 million for the second quarter of 2020 compared~~mainly due to ~~$27.6 million for the second quarter of 2019.~~higher loan syndication fees.

Net gain ~~(loss)~~ on sale of securitiesrepresents net losses and gains ~~or losses incurred~~realized on the sale of securities from our AFS investment securities portfolio. Net gain (loss) on sale of securities is impacted significantly by changes in market interest rates and strategies we use to manage yield, liquidity and interest rate risk, and it is difficult to forecast the amount of net losses or gains consistently. We realized aThe net gain on sale of securities ~~of $485 thousand~~ in the ~~three~~six months ended June 30, ~~2020 compared to a loss of $528 thousand in the three months ended June 30, 2019. The net gain in 2020 and the net loss in 2019~~2021 was mainly due to the sale of ~~municipal~~$20.7 million of corporate securities. The gain on sale of securities ~~as we managed the portfolio~~ in ~~response to market conditions. For~~ the six months ended June 30, 2020 we realized net gain on sale of securities of $8.9 million compared to a net loss of $13.7 million in 2019. We realized gains in 2020 to reduce the level of investment securities to total earning assets. We realized a loss in 2019was mainly due to the sale of ~~$738.8~~$460.0 million of AFS ~~securities. The~~securities and the proceeds were used to fund ~~a portion of the commercial loans acquired from Woodforest and to reduce wholesale deposits and borrowings.~~loan growth.

Net gain on called securities in the six months ended June 30, 2020 represents ~~income earned~~the gain realized on securities called of $139.8 million, which were mainly government agency securities.

~~STERLING BANCORP AND SUBSIDIARIES~~

~~Gain on sale of residential mortgage loans~~ ~~represents the net gain realized on the sale of~~ ~~residential mortgage loans held for sale in the first quarter of 2019. The sale was part of our strategy of increasing the percentage of commercial loans to total loans in our loan portfolio.~~

Other non-interest income principally includes fees for ~~loan~~interest rate swaps, earnings from community development investments, safe deposit rentals and foreign exchange fees. Other non-interest income increased $437 thousand compared to the second quarter of 2020. The increase was mainly due to an increase in earnings from community development investments. For the six months ended June 30, 2021, other non-interest income declined ~~to $1.5~~$1.2 million, ~~in 2020 from $3.1 million in 2019 and~~which was mainly due to lower ~~loan swap transaction volumes.~~transactional volumes in our derivatives business, which was $463 thousand in the six months ended June 30, 2021 compared to $2.5 million in the same period in 2020. Partially offsetting this decline was an increase in earnings from community development investments.

STERLING BANCORP AND SUBSIDIARIES

Non-interest expense. The components of non-interest expense were as follows for the periods presented below:

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
Compensation and benefits $ 54,668 $ 54,473 $ 109,544 $ 110,463
Stock-based compensation plans 5,913 4,605 11,919 9,728
Occupancy and office operations 14,695 16,106 29,894 32,641
Information technology 7,312 9,047 15,330 17,722
Amortization of intangible assets 4,200 4,785 8,400 9,611
FDIC insurance and regulatory assessments 3,638 2,994 6,844 6,332
OREO, net 1,233 458 1,285 675
Charge for asset write-downs, retention and severance — — — 3,344
Impairment related to financial centers and real estate consolidation strategy — 14,398 — 14,398
Other non-interest expense 33,222 20,074 56,378 37,018
Total non-interest expense $ 124,881 $ 126,940 $ 239,594 $ 241,932

Non-interest expense for the three months ended June 30, 2020 was $124.9 million, a $2.1 million decrease from $126.9 million for the three months ended June 30, 2019. The decrease between the periods was mainly a result of strong management of operating expenses, including continued execution of our real estate consolidation strategy and efficiencies in technology. Changes in the components of non-interest expense are discussed below.


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Compensation and benefits	$	56,953	$	54,668	$	115,040	$	109,544
Stock-based compensation plans	6,781		5,913		13,398		11,919
Occupancy and office operations	13,875		14,695		28,390		29,894
Information technology	9,741		7,312		18,987		15,330
Professional fees	7,561		5,458		14,638		11,207
Amortization of intangible assets	3,776		4,200		7,552		8,400
FDIC insurance and regulatory assessments	2,344		3,638		5,574		6,844
Other real estate owned expense (“OREO”), net	(72)		1,233		(140)		1,285
Merger-related expense	2,481		—		2,481		—

Impairment related to financial centers and real estate consolidation strategy	475		—		1,108		—
Loss on extinguishment of borrowings	1,243		9,723		1,243		10,476
Other non-interest expense	15,471		18,041		30,523		34,695
Total non-interest expense	$	120,629	$	124,881	$	238,794	$	239,594

Compensation and benefits expense was $57.0 million for the three months ended June 30, 2021, compared to $54.7 million for the three months ended June 30, ~~2020, compared to $54.5 million for the three months ended June 30, 2019.~~2020. The ~~decline~~increase was mainly due to ~~lower payroll taxes.~~a higher bonus compensation accrual and an increase in medical costs. For the six months ended June 30, ~~2020,~~2021, compensation and employee benefits ~~declined $919 thousand, which~~expense was $115.0 million compared to $109.5 million for the six months ended June 30, 2020. The increase in the six month period was mainly due to ~~a decline~~the same factors discussed above. The reduction in ~~our full time equivalent employees between the periods.~~financial center personnel has offset continued hiring of commercial banking, business development and risk management personnel.

Stock-based compensation plans expense was $6.8 million in the second quarter of 2021, compared to $5.9 million in the second quarter of ~~2020, compared to $4.6 million in the second quarter of 2019. For the six months ended June 30, 2020, stock based compensation plans expense increased $2.2 million.~~2020. The ~~increases were~~increase was due to ~~a greater percentage of~~additional personnel included in our stock-based compensation ~~paid to our executive management and senior personnel in stock awards to better align the interests of management and employees to those of our stockholders.~~plan. For additional information related to our employee benefit plans and stock-based compensation, see Note ~~11.~~10. “Stock-Based Compensation” in the notes to consolidated financial statements included elsewhere in this report. For the six months ended June 30, 2021, stock-based compensation expense was $13.4 million compared to $11.9 million for the six months ended June 30, 2020. The increase was due to the same factors discussed above.

Occupancy and office operations expense was $13.9 million in the second quarter of 2021, compared to $14.7 million in the second quarter of ~~2020, compared~~2020. The decline in occupancy and office operations expense is due to ~~$16.1 million in the second quarter of 2019.~~continuing efforts to rationalize our real estate footprint. For the six months ended June 30, ~~2020~~2021, occupancy and office operations expense ~~declined by $2.7 million. At~~was $28.4 million, compared to $29.9 million for the six months ended June 30, ~~2020, we had 78 financial center locations, compared~~2020. This decrease was due to ~~97 financial centers at June 30, 2019.~~the same factors discussed above.

Information technology expense, which mainly includes the cost of our loan and deposit operating systems and contracted service and maintenance associated with other data processing systems, as well as amortization related to our investment in various digital initiatives, was $9.7 million in the second quarter of 2021, compared to $7.3 million in the second quarter of ~~2020, compared~~2020. The increase was mainly due to ~~$9.0 million~~investments in ~~the second quarter of 2019.~~various back-office automation initiatives and digital banking transformation efforts, which are designed to enable us to drive future revenue growth and expand our digital offerings. For the six months ended June 30, ~~2020 information technology expense declined by $2.4 million. The decreases in~~2021, information technology expense was $19.0 million, compared to $15.3 million for the six months ended June 30, 2020. The increase was due to the same factors discussed above.

Professional fees, were $7.6 million for the three months ended June 30, 2021, compared to $5.5 million for the three months ended June 30, 2020. The increase was mainly due to ~~a decline in data processing expense.~~incremental fees for consulting services to assist us with automation and digital banking platform projects. For the six months ended June 30, 2021, professional fees were $14.6 million, compared to $11.2 million for the six months ended June 30, 2020. The increase was due to the same factors discussed above.

6654

STERLING BANCORP AND SUBSIDIARIES

Amortization of intangible assets expense mainly includes amortization of core deposit intangible assets, customer lists and non-compete agreements. Amortization of intangible assets was ~~$4.2~~$3.8 million in the three months ended June 30, ~~2020,~~2021, compared to ~~$4.8~~$4.2 million for the three months ended June 30, ~~2019. For~~2020. Amortization of intangible assets expense was $7.6 million for the six months ended June 30, ~~2020, amortization of intangible assets expense declined by $1.2 million.~~2021, compared to $8.4 million for the six months ended June 30, 2020. The decreases in such amortization expense were mainly due to the accelerated amortization of the core deposit intangible assets that were recorded in the merger with Astoria ~~Merger~~Financial Corporation and other acquisitions. For additional information, see Note 6.5. “Goodwill and Other Intangible Assets” in the notes to the consolidated financial statements included elsewhere in this report.

~~Charge for asset write-downs, retention~~FDIC insurance and ~~severance expense~~regulatory assessments was ~~$3.3~~$2.3 million and $5.6 million for the three and six months ended June 30, ~~2019. In~~2021, respectively compared to $3.6 million and $6.8 million for the ~~year ago~~three and six months period weended June 30, 2020, respectively. The decline was due to lower FDIC insurance assessment and was mainly due to a decline in average assets, retention of 100% of capital and improvement in earnings in 2021 compared to 2020.

Merger-related expense was $2.5 million for the three and six months ended June 30, 2021 and was incurred in connection with our pending merger with Webster. The expense included fees for a ~~charge related~~fairness opinion, diligence and integration efforts to ~~the Woodforest portfolio acquisition for professional fees, retention and severance, systems integration costs and an impairment of a lease assumed in the transaction.~~date.

Impairment related to financial centers and real estate consolidation strategy was ~~$14.4~~$475 thousand for the three months ended June 30, 2021. This charge included a lease termination payment of $268 thousand and decommissioning and restoration expense for another location of $207 thousand. The charge of $1.1 million for the six months also included write-off of leasehold improvements of $127 thousand, loss on sale of fixed assets from the sale of two owned locations of $309 thousand and write-off of other fixed assets abandoned when we disposed of certain facilities of $197 thousand.

Loss on extinguishment of borrowings was $1.2 million for the three and six months ended June 30, ~~2019. This charge included a write-off~~2021 and represents the loss related to the payoff of ~~leasehold improvements, land~~the subordinated notes - Bank, which were redeemed on April 1, 2021. For the three and ~~buildings,~~six months ended June 30, 2020, the losses of $9.7 million and $10.5 million, respectively, were related to the ~~early termination~~repayment of ~~several long-term leases.~~FHLB borrowings.

Other non-interest expense includes ~~professional fees,~~ depreciation expense on operating leases, ~~acquired in the Santander Portfolio Acquisition,~~ advertising and promotion, communications, residential mortgage loan servicing, insurance, operational losses, commercial loan processing expenses, pension and post retirement plans, recruitment fees, taxes not included in income tax expense, travel and client entertainment, and colleague training expense. ~~For~~The decline in the three and six months periods ended June 30, ~~2020, other non-interest expense was $33.2 million,~~2021 when compared to ~~$20.1 million for~~ the ~~three months ended June 30, 2019. For the six months ended June 30,~~same periods in 2020 ~~other non-interest expense increased by $19.4 million. The increases were~~was mainly due to incremental ~~operating expenses of $3.7 million related~~costs incurred in connection with the pandemic and included a contribution to ~~COVID-19 for charitable contributions,~~the Sterling National Bank Charitable Foundation, as well as compensation and occupancy expenses and $9.7 million for the three month 2020 period and $10.5 million for the six month 2020 period of termination fees associated with the exit of FHLB borrowings. The three months and six months ended June 30, 2020 included depreciation expense on operating leases of $3.1 million and $6.6 million that did not occur in 2019.costs. See Note ~~12.~~11. “Other Non-Interest Expense, Other Assets and Other Liabilities” in the notes to the consolidated financial statements included elsewhere in this report for details on significant components.

Income tax expense ~~(benefit)~~ was $24.5 million, representing an effective income tax rate of 20.0% for the three months ended June 30, 2021, compared to income tax expense of $7.1 million for the three months ended June 30, 2020 compared to $24.0 million for the three months ended June 30, 2019. Based on our results year to date, increased provision expense, and the resulting increase in the percentage of non-taxable income to taxable income, we reduced our2020. Our estimated effective income tax rate for full year 2021 is 19.5% prior to ~~12.5%~~the impact of discrete items, which required additional income tax expense in the second quarter to achieve our year to date estimated expense.

Income tax expense was $47.5 million, or 19.4% of pre-tax income, for the six months ended June 30, 2021 and a benefit of $932.0 thousand, or a benefit of 1.5% for the six months ended June 30, 2020. Note that our estimated effective tax rate may fluctuate based on the amount of provision for credit losses that we record in the remainder of 2020. For the six months ended June 30, 2020, we recorded an income tax benefit of $932 thousand compared to income tax expense of $52.5 million for the six months ended June 30, 2019. Income tax expense was recorded at 21.0% in the three and six months ended June 30, 2019. For the six months ended June 30, 2020, income tax expense was impacted by two discrete items:

•Based on provisions of the CARES Act, we had an NOL carryback that resulted in an income tax benefit of $21.3 million. We recorded an accrual for uncertain tax positions of $11.5 million which is discussed in Note 10. “Income Taxes”. The net of these two items was an income tax benefit of $9.8 million.

•~~We recorded income tax expense of $778 thousand due to vesting of stock-based compensation.~~

See Note ~~10.~~9. “Income Taxes” in the notes to the consolidated financial statements included elsewhere in this report for additional information.

STERLING BANCORP AND SUBSIDIARIES

Portfolio Loans

The following table sets forth the composition of our loan portfolio, excluding loans held for sale, by type of loan at the periods indicated.

June 30, 2020 December 31, 2019
Amount % Amount %
Commercial:
C&I:
Traditional C&I $ 3,361,655 15.1 % $ 2,355,031 11.0 %
Asset-based lending 856,020 3.8 1,082,618 5.0
Payroll finance 124,354 0.6 226,866 1.1
Warehouse lending 1,567,186 7.0 1,330,884 6.2
Factored receivables 158,509 0.7 223,638 1.0
Equipment financing 1,699,805 7.6 1,800,564 8.4
Public sector finance 1,399,215 6.3 1,213,118 5.7
Total C&I 9,166,744 41.1 8,232,719 38.4
Commercial mortgage:
CRE 5,817,958 26.0 5,418,648 25.3
Multi-family 4,584,939 20.6 4,876,870 22.7
ADC 572,558 2.6 467,331 2.2
Total commercial mortgage 10,975,455 49.2 10,762,849 50.2
Total commercial 20,142,199 90.3 18,995,568 88.6
Residential mortgage 1,938,212 8.7 2,210,112 10.3
Consumer 214,856 1.0 234,532 1.1
Total portfolio loans 22,295,267 100.0 % 21,440,212 100.0 %
Allowance for credit losses (365,489) (106,238)
Total portfolio loans, net $ 21,929,778 $ 21,333,974


	June 30, 2021				December 31, 2020
	Amount		%		Amount		%
Commercial:
C&I:
Traditional C&I	$	2,917,848	14.1	%	$	2,920,205	13.4	%
Asset-based lending	707,207		3.4		803,004		3.7
Payroll finance	158,424		0.8		159,237		0.7
Warehouse lending	1,229,588		5.9		1,953,677		8.9
Factored receivables	217,399		1.0		220,217		1.0
Equipment financing	1,381,308		6.7		1,531,109		7.0
Public sector finance	1,723,270		8.3		1,572,819		7.2
Total C&I	8,335,044		40.2		9,160,268		41.9
Commercial mortgage:
CRE	5,861,542		28.3		5,831,990		26.7
Multi-family	4,281,615		20.7		4,406,660		20.2
ADC	690,224		3.3		642,943		2.9
Total commercial mortgage	10,833,381		52.3		10,881,593		49.8
Total commercial	19,168,425		92.5		20,041,861		91.7
Residential mortgage	1,389,294		6.7		1,616,641		7.4
Consumer	166,378		0.8		189,907		0.9
Total portfolio loans	20,724,097		100.0	%	21,848,409		100.0	%
ACL - loans	(314,873)				(326,100)
Total portfolio loans, net	$	20,409,224			$	21,522,309

Note: the percentages in the table above are rounded to the nearest tenth of a percent.

Overview. Total portfolio loans, net, ~~increased $595.8 million~~decreased $1.1 billion to ~~$21.9~~$20.4 billion at June 30, ~~2020,~~2021, compared to ~~$21.3~~$21.5 billion at December 31, ~~2019. This~~2020. A slowdown in mortgage refinance activity drove a $724.1 million sequential decline in our mortgage warehouse lending balance and was ~~mainly due~~the primary driver of the decline in total C&I. Repayments of multi-family loans that were predominately broker originated contributed to ~~an increase~~the decline in total commercial loans while repayments of ~~$1.1 billion, which was offset by a decline in~~ residential mortgage loans ~~of $271.9 million, and~~contributed to the ~~change in the ACL of $259.3 million. The change~~decline in total portfolio ~~loans is consistent with our strategy of transitioning our portfolio composition to reduce residential mortgage loans and increase the proportion of commercial~~ loans.

At June 30, ~~2020,~~2021, total C&I loans comprised ~~41.1%~~40.2% of the total loan portfolio, compared to ~~38.4%~~41.9% at December 31, ~~2019.~~2020. Commercial mortgage loans comprised ~~49.2%~~52.3% and ~~50.2%~~49.8% of the total loan portfolio at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Residential mortgage loans comprised ~~8.7%~~6.7% of the total loan portfolio at June 30, ~~2020,~~2021, compared to ~~10.3%~~7.4% at December 31, ~~2019. Our goal, over time, is for our loan portfolio to consist of 45.0% traditional C&I and commercial finance; 45.0% commercial real estate; and 10.0% consumer and residential mortgage loans.~~2020.

In the six months ended June 30, ~~2020,~~2021, traditional C&I loans ~~increased~~decreased by ~~$1.0 billion, which included $635.7~~$2.4 million, primarily as a result of the repayment of $131.1 million of PPP loans ~~originated~~with increases in ~~the second quarter~~line of ~~2020. Warehouse lending~~credit usage and C&I loan origination activity substantially offsetting this decline.Total C&I loans ~~increased $236.3 million, which was mainly due to~~declined largely as a result of the decline in ~~residential mortgage interest rates~~warehouse lending loans discussed above and ~~an increase in residential mortgage loan refinance activity. Public sector~~were also impacted by pay downs of asset-based lending loans, which decreased by $95.8 million and by pay downs of equipment finance loans ~~increased $186.1 million, driven by continued investment by local municipalities in infrastructure and other projects. These increases~~which decreased $149.8 million.These decreases were partially offset by ~~declines~~an increase in ~~asset-based lending~~public sector finance loans of $226.6 million, which was due to decreases in borrowing bases as a result of reduced economic activity, a decline of $100.8 million in equipment finance loans, which included the sale of $98.4 million of small balance equipment finance loans and a decrease of $102.5 million in payroll finance loans, due to seasonal fluctuations and the impact of COVID-19 on our clients’ businesses.$150.5 million.

CRE loans increased ~~$399.3~~$29.6 million in the six months ended June 30, ~~2020.~~2021. The increase was mainly due to ~~strong~~a uptick in demand for these loan products in our market area. Multi-family loans declined by $125.0 million in the first six months of ~~2020 by $291.9 million,~~2021, mainly due to run-off in broker originated loans. Our CRE loans ~~that are not consistent with our strategy.~~balances were impacted by the sale of $122.5 million of mostly criticized and classified commercial real estate and multifamily loans in the second quarter of 2021 and the sale of $70.0 million of mostly criticized and classified commercial real estate loans in the first quarter of 2021.

6856

STERLING BANCORP AND SUBSIDIARIES

ADC loans, which are a component of commercial mortgage loans, increased ~~$105.2~~$47.3 million in the six months ended June 30, ~~2020. This~~2021. The increase is mainly due to ~~construction loans~~originations related to our affordable housing tax credit investments. ~~Other ADC loans are generally originated to select clients, mostly within our immediate footprint.~~

Residential mortgage loans were ~~$1.9~~$1.4 billion at June 30, ~~2020~~2021, compared to ~~$2.2~~$1.6 billion at December 31, ~~2019.~~2020. The decline was mainly due to repayments.

Included in our residential mortgage portfolio are loans that were originated ~~in 2010 or earlier~~ as interest-only adjustable rate mortgages (“ARM loans”) with terms of up to forty years, which have an initial fixed rate for five, seven or 10 years and convert into one year interest-only ARM loans at the end of the initial fixed rate period. Interest-only ARM loans require the borrower to pay interest only during the first ten years of the loan term, which typically results in a material increase in the borrower’s monthly payments upon conversion. After the tenth anniversary of the loan, principal and interest payments are required to amortize the loan over the remaining term. There were ~~$739.5~~$480.9 million of residential mortgage loans that were originated as interest only ARM loans at June 30, ~~2020~~2021 compared to ~~$846.6~~$599.5 million at December 31, ~~2019.~~2020.

Non-Performing Loans and Non-Performing Assets

The table below sets forth the amounts and categories of our NPAs at the dates indicated. There were no warehouse lending or public sector finance loans that were non-performing at such dates.

June 30, December 31,
2020 2019
Non-accrual loans:
Traditional C&I $ 27,962 $ 27,148
Asset-based lending 23,188 4,966
Payroll finance 882 9,396
Factored receivables 6,320 —
Equipment financing 53,083 33,050
Commercial real estate 37,394 26,213
Multi-family 9,884 3,400
ADC 30,434 434
Residential mortgage 60,308 62,275
Consumer 10,878 12,169
Total non-accrual loans 260,333 179,051
Accruing loans past due 90 days or more 272 110
Total NPLs 260,605 179,161
OREO 8,665 12,189
Total NPAs $ 269,270 $ 191,350
TDRs accruing and not included above $ 40,708 $ 49,807
Ratios:
NPLs to total loans 1.17 % 0.84 %
NPAs to total assets 0.87 0.63


	June 30,			December 31,
	2021			2020
Non-accrual loans:
Traditional C&I	$	41,593		$	19,223
Asset-based lending	7,535			5,255
Payroll finance	652			2,300


Equipment financing	23,452			30,634
CRE	48,074			46,053
Multi-family	327			4,485
ADC	25,000			30,000
Residential mortgage	17,132			18,661
Consumer	9,554			10,278
Total non-accrual loans	173,319			166,889
Accruing loans past due 90 days or more	—			170
Total NPLs	173,319			167,059
OREO	816			5,347
Total NPAs	$	174,135		$	172,406
TDRs accruing and not included above	$	24,681		$	37,492
Ratios:
NPLs to total loans	0.84		%	0.76		%
NPAs to total assets	0.60			0.58

NPAs and NPLs. NPLs include non-accrual loans and accruing loans past due 90 days or more. NPAs include NPLs and OREO. At June 30, ~~2020,~~2021, total NPLs increased ~~$81.4~~$6.3 million to ~~$260.6~~$173.3 million compared to ~~$179.2~~$167.1 million at December 31, ~~2019.~~2020. Non-accrual loans were ~~$260.3~~$173.3 million and there were no loans 90 days past due and still accruing interest ~~which were well secured and in the process of collection, were $272 thousand~~ as of June 30, ~~2020.~~2021. Non-accrual loans increased by ~~$81.3~~$6.4 million to ~~$260.3~~$173.3 million at June 30, ~~2020~~2021 from ~~$179.1~~$166.9 million at December 31, ~~2019.~~2020. The increase was mainly due to ~~ADC, equipment finance, asset-based lending~~two C&I relationships, one CRE relationship and ~~commercial real estate~~smaller ABL loans which are in the process of work-out or ~~exit. Loans past due 90 days or more~~exit, partially offset by the payoff of one CRE relationship and ~~still accruing was $272 thousand~~two C&I relationships and ~~are consumer loans that were in~~ the ~~process~~partial charge off of ~~being renewed.~~one ADC loan.

TDRs. TDRs still accruing interest income are loans modified for borrowers that have experienced financial difficulties but are performing in accordance with the modified terms of their loan and were performing prior to the modification. Loan modification concessions may include actions such as an extension of the maturity date or the lowering of interest rates and monthly payments. At June 30, ~~2020,~~2021, total TDRs were ~~$75.8~~$52.5 million, of which ~~$40.7~~$24.7 million were performing in accordance with their modified terms and ~~$35.1~~$27.9 million were non-accrual. At December 31, ~~2019,~~2020, total TDRs were ~~$75.7~~$79.0 million of which ~~$49.8~~$37.5 million were performing and ~~$25.8~~$41.5 million were non-accrual. The decrease in TDRs at June 30, 2021 was primarily due to the loan sales mentioned above and the payoff of one CRE relationship. TDR balances are more fully discussed in Note 3. “Portfolio Loans - TDRs” in the notes to the

6957

STERLING BANCORP AND SUBSIDIARIES

non-accrual. The decrease in performing TDRs at June 30, 2020 was mainly due to the transfer to non-accrual of TDRs that were performing at December 31, 2019. Total charge-offs of TDR loans were $4.3 million and $554 thousand for the six months ended June 30, 2020 and 2019, respectively. TDR balances are detailed in the TDR section of Note 4. “Portfolio Loans” in the notes to the consolidated financial statements included elsewhere in this report. As of June 30, ~~2020,~~2021, there were no commitments to lend additional funds to borrowers with loans that have been classified as TDRs.

Forbearance under the CARES Act. The CARES Act permits financial institutions to suspend requirements ~~under GAAP for~~related to loan modifications to borrowers affected by COVID-19 that would otherwise, in accordance with GAAP, be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and as modified by the Consolidated Appropriations Act, the earlier of ~~December 31, 2020~~January 1, 2022 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. On April 7, 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (the “Agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and provided practical expedients for evaluating whether loan modifications that occur in response to COVID-19 are TDRs. The Agencies confirmed with the Financial Accounting Standards Board that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not considered to be TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. We are applying this guidance to qualifying loan modifications.

At June 30, ~~2020,~~2021, we had approved CARES Act conforming payment deferrals on outstanding loan balances as shown in the following table:


		Loan balance outstanding		Deferral of principal and interest		%			Loan balance outstanding		Deferral of principal and interest		%
Commercial
C&I:

Traditional C&I	Traditional C&I	$	3,361,655	$	212,878	6.3	%	Traditional C&I	$	2,917,848	$	—	—	%
Asset-based lending	Asset-based lending	856,020		—		—		Asset-based lending	707,207		—		—
Payroll finance	Payroll finance	124,354		295		0.2		Payroll finance	158,424		—		—
Warehouse lending	Warehouse lending	1,567,186		—		—		Warehouse lending	1,229,588		—		—
Factored receivables	Factored receivables	158,509		—		—		Factored receivables	217,399		—		—
Equipment finance	Equipment finance	1,699,805		236,207		13.9		Equipment finance	1,381,308		1,577		0.1
Public sector finance	Public sector finance	1,399,215		—		—		Public sector finance	1,723,270		—		—
Total C&I		9,166,744		449,380		4.9
Commercial mortgage:

Commercial real estate	Commercial real estate	5,817,958		749,318		12.9		Commercial real estate	5,861,542		47,738		0.8
Multi-family	Multi-family	4,584,939		197,758		4.3		Multi-family	4,281,615		5,166		0.1
ADC	ADC	572,558		17,353		3.0		ADC	690,224		—		—
Total commercial mortgage		10,975,455		964,429		8.8
Total commercial		20,142,199		1,413,809		7.0

Residential	Residential	1,938,212		293,389		15.1		Residential	1,389,294		51,881		3.7
Consumer	Consumer	214,856		19,320		9.0		Consumer	166,378		3,402		2.0
Total Portfolio loans	Total Portfolio loans	$	22,295,267	$	1,726,518	7.7	%	Total Portfolio loans	$	20,724,097	$	109,764	0.5	%

Principal and interest deferrals were ~~approved for 7.7%~~in place in respect of loans representing 0.5% of our loan portfolio. Deferrals consist mainly of 90-day principal and interest deferral with the ability to extend an additional 90-day period at the Bank’s option. We are closely monitoring and working with our clients to determine ongoing deferral extensions and requests.

SBA PPP Loans. ~~We are participating as a lender under the SBA’s PPP.~~ As of June 30, ~~2020,~~2021, we had ~~nearly 3,300~~13 portfolio loans totaling ~~$649.4~~$7.8 million ~~outstanding. We anticipate many of these~~outstanding and all loans ~~will be forgiven~~are in the ~~third quarter~~process of ~~2020 and are actively working with our borrowers to submit the required documentation to the SBA.~~being forgiven.

~~STERLING BANCORP AND SUBSIDIARIES~~

OREO. Real estate acquired as a result of foreclosure or by deed in lieu of foreclosure is classified as OREO until such time as it is sold. When real estate is transferred to OREO, it is recorded at fair value less ~~costs~~cost to sell. If the fair value less cost to sell is less than the loan balance, the difference is charged against the ~~ACL.~~ACL - loans. After transfer to OREO, we regularly update the fair value of the properties. Subsequent declines in fair value are charged to current earnings and included in other non-interest expense as part of OREO expense. At June 30, ~~2020,~~2021, we had OREO properties with a recorded balance of ~~$8.7 million,~~$816 thousand, compared to ~~$12.2~~$5.3 million at December 31, ~~2019.~~2020. The decrease was mainly due to ~~$2.7 million in~~ sales ~~and $1.5 million~~ of ~~write-downs to fair value.~~OREO properties for cash. We had ~~OREO~~no additions ~~of $732 thousand~~to OREO in the six months ended June 30, ~~2020.~~2021.

Classification of Assets. Our determination as to the classification of our assets and the amount of our ACL ~~are~~- loans is subject to review by our regulators, who can direct the charge-off of loans and order the establishment of ~~additions to our~~additional ACL. Management regularly reviews

STERLING BANCORP AND SUBSIDIARIES

our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. As of June 30, ~~2020,~~2021, we had ~~$141.8~~$388.5 million of loans designated as ~~“special mention”~~special mention compared to ~~$160.0~~$461.5 million at December 31, ~~2019.~~2020. The decrease in the first half of 2021 was mainly due to ~~asset-based lending~~approximately $100 million of loans that were downgraded to substandard, approximately $80 million of loans that were upgraded to pass, approximately $25 million of repayments and ~~small balance equipment finance~~approximately $20 million of loans ~~which~~included in our loan sales. These declines were ~~classified substandard in~~partially offset by approximately $165 million of loans, mainly multi-family, CRE and C&I that were newly designated special mention during the period. The vast majority of the borrowers continue to perform.

On the basis of management’s review of our assets at June 30, ~~2020,~~2021, classified assets consisted of ~~substandard~~ loans of ~~$415.9~~$616.4 million ($611.8 million were rated substandard and one loan of $4.6 million was rated doubtful) and OREO of ~~$8.7 million.~~$816 thousand. Substandard loans were ~~$295.4~~$528.8 million and OREO was ~~$12.2~~$5.3 million at December 31, ~~2019.~~2020. The increase in substandard loans in the six months ended June 30, ~~2020~~2021 was mainly related to ~~asset-based lending~~ loans ~~small balance equipment finance~~transferred from special mention and newly designated classified loans ~~commercial real estate~~of approximately $210 million, and was partially offset by approximately $80 million of substandard loans that were included in our loan sales, approximately $40 million of repayments and ~~one ADC loan.~~approximately $6 million of charge-offs. Our asset resolution team is working with these borrowers to reduce the outstanding balances and maximize repayments.

ACL - Loans. The ACL - loans is a valuation account that is deducted from the amortized cost basis of portfolio loans to present the net amount expected to be collected on portfolio loans over their contractual life. ~~See Note 1. “Basis of Financial Statement Presentation - (e) Accounting Principle Change” for additional detail regarding our ACL - loan calculation methodology.~~

Our estimate of credit losses at June 30, ~~2020~~2021 is based in part on the macro-economic forecasts and assumptions contained in the Moody’s June ~~2020~~20, 2021 Forecast Vintage Baseline Scenario published July 4, 2020, which included the impact of economic developments such as the pandemic. The Moody’s baseline forecast incorporates a significant amount of macroeconomic assumptions and variables.Scenario.

To address potential model uncertainties, we overlay qualitative factors to the quantitative results of loss estimates calculated under the assumptions above. The qualitative adjustments include the following:

•Lending policies and procedures including changes in lending strategies, underwriting standards, collection, write-off and recovery practices;

•Experience, ability and depth of management and lending and other relevant staff;

•Nature and volume of our loans and changes therein;

•Changes and expected changes in general market conditions of either the geographic area or industry related to our exposure;

•An adjustment for economic conditions during a reasonable and supportable period; and

•An adjustment for additional factors including data quality and changes in the number of assumptions used in quantitative models.

The ACL - loans ~~increased~~decreased from ~~$106.2~~$326.1 million at December 31, ~~2019~~2020 to ~~$365.5~~$314.9 million at June 30, ~~2020.~~2021. The ACL - loans at June 30, ~~2020~~2021 represented ~~140.2%~~181.7% of non-performing loans and ~~1.64%~~1.52% of total portfolio loans. At December 31, ~~2019,~~2020, the allowance for loan losses represented ~~59.3%~~195.2% of non-performing loans and ~~0.50%~~1.49% of total portfolio loans.

7159

STERLING BANCORP AND SUBSIDIARIES

Allocation of ~~ACL.~~ACL - loans. The following table sets forth the ACL - loans allocated by loan category, the total loan balances by category (excluding loans held for sale), and the percent of loans in each category to total loans at the dates indicated. The ~~allowance for loan losses~~ACL allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


		June 30, 2020										December 31, 2019											June 30, 2021				December 31, 2020
		Allowance for credit losses		Loan balance		% of ACL to loan balance		Allowance for loan losses		Loan balance		% of ALLL to loan balance			Allowance for credit losses		Loan balance		% of ACL to loan balance		Allowance for loan losses		Loan balance		% of ACL to loan balance
Traditional C&I	Traditional C&I	$	44,514	$	3,361,655	1.32	%	$	15,951	$	2,355,031	0.68	%	Traditional C&I	$	47,494	$	2,917,848	1.63	%	$	42,670	$	2,920,205	1.46	%
Asset-based lending	Asset-based lending	30,853		856,020		3.60		14,272		1,082,618		1.32		Asset-based lending	10,474		707,207		1.48		12,762		803,004		1.59
Payroll finance	Payroll finance	1,931		124,354		1.55		2,064		226,866		0.91		Payroll finance	1,567		158,424		0.99		1,957		159,237		1.23
Warehouse lending	Warehouse lending	668		1,567,186		0.04		917		1,330,884		0.07		Warehouse lending	1,087		1,229,588		0.09		1,724		1,953,677		0.09
Factored receivables	Factored receivables	10,586		158,509		6.68		654		223,638		0.29		Factored receivables	3,025		217,399		1.39		2,904		220,217		1.32
Equipment financing	Equipment financing	78,172		1,699,805		4.60		16,723		1,800,564		0.93		Equipment financing	27,987		1,381,308		2.03		31,794		1,531,109		2.08
Public sector finance	Public sector finance	3,765		1,399,215		0.27		1,967		1,213,118		0.16		Public sector finance	6,168		1,723,270		0.36		4,516		1,572,819		0.29
CRE	CRE	98,905		5,817,958		1.70		27,965		5,418,648		0.52		CRE	155,589		5,861,542		2.65		155,313		5,831,990		2.66
Multi-family	Multi-family	36,652		4,584,939		0.80		11,440		4,876,870		0.23		Multi-family	32,054		4,281,615		0.75		33,320		4,406,660		0.76
ADC	ADC	18,195		572,558		3.18		4,732		467,331		1.01		ADC	11,371		690,224		1.65		17,927		642,943		2.79
Residential mortgage	Residential mortgage	33,955		1,938,212		1.75		7,598		2,210,112		0.34		Residential mortgage	14,032		1,389,294		1.01		16,529		1,616,641		1.02
Consumer	Consumer	7,293		214,856		3.39		1,955		234,532		0.83		Consumer	4,025		166,378		2.42		4,684		189,907		2.47
Total	Total	$	365,489	$	22,295,267	1.64		$	106,238	$	21,440,212	0.50		Total	$	314,873	$	20,724,097	1.52		$	326,100	$	21,848,409	1.49

Collateral Dependent Loans. A loan must meet both of the following conditions to be considered collateral dependent:

•We expect repayment of the financial asset to be provided substantially through the operation or sale of the collateral.

•We determined the borrower is experiencing financial difficulty as of the financial statement date.

Generally, loans are identified as collateral dependent when the loan is in foreclosure, is a TDR or is a loan that was measured for impairment ~~at December 31, 2019 (see below).~~when we adopted CECL on January 1, 2020. For collateral dependent loans, we measure the expected credit losses based on the difference between the fair value of the collateral and the amortized cost basis. If the loan is in foreclosure, or we determine foreclosure is probable, we reduce the fair value of the collateral by ~~costs~~cost to sell the asset. If we expect repayment from the operation of the asset, we do not reduce for the cost to sell.

Collateral dependent loans were ~~$160.0~~$143.3 million at June 30, 2021 which was decrease of $1.7 million from $145.0 million at December 31, 2020. The ~~increase~~decrease in collateral dependent loans ~~compared to impaired loans at December 31, 2019,~~ was mainly due to payoffs of three C&I relationships, one CRE relationship, the partial charge-off of an ADC ~~relationship, asset-based lending loans, equipment finance loans~~loan and the ~~adoption~~sale of certain CRE and multi-family loans. This decrease was partially offset by the ~~CECL Standard, which impacted the classification~~addition of ~~collateral dependent equipment finance~~one CRE relationship and ~~residential mortgage loans. Prior to 2020, equipment finance and residential mortgage loans were measured for impairment only if the loan balance exceeded $750 thousand.~~one C&I relationship. As our CECL methodology allows us to determine fair value and expected credit losses for each loan individually, we now consider loans collateral dependent based on the criteria discussed above.

~~Impaired Loans.~~ ~~Before~~ At June 30, 2021 we ~~implemented the CECL Standard, a loan was impaired when it was probable we will be unable~~had specific reserves of $21.6 million allocated to ~~collect all amounts due according to the contractual terms of the loan agreement. Impaired loan values were based~~$103.2 million in principal on ~~one of three measures: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the~~loans that are considered collateral ~~if the loan is collateral dependent. If the measure of an impaired loan was less than its recorded investment,~~dependent loans in our practice was to write-down the loan against the allowance for loan losses so the recorded investment matched the impaired value of the loan. Impaired loans generally included a portion of non-performing loans and accruing and performing TDR loans. At December 31, 2019, we held impaired loans of $109.0 million.ACL.

Changes in Financial Condition between June 30, ~~2020~~2021 and December 31, ~~2019~~2020

Total assets ~~increased $253.4~~decreased $676.2 million ~~to $30.8 billion~~ at June 30, ~~2020,~~2021, compared to ~~$30.6 billion at~~ December 31, ~~2019.~~2020. Components of the change in total assets were:

•~~Commercial loans~~Cash balances increased $182.4 million to $487.4 million at June 30, 2021, compared to December 31, 2020. The increase was mainly due to increases in deposit balances and contraction in our loan balances.

•Total investment securities increased by ~~$1.1 billion~~$327.0 million to ~~$20.1~~$4.4 billion at June 30, ~~2020,~~2021, compared to ~~$19.0~~$4.0 billion at December 31, ~~2019.~~2020. The ~~majority~~increase in investment securities included the purchase of ~~this increase is related~~US Treasury and corporate securities in response to ~~SBA PPP loans funded~~the significant levels of excess liquidity generated by deposit inflows and the contraction in ~~the second quarter of 2020.~~our loan portfolio.

•Portfolio loans, net decreased $1.1 billion at June 30, 2021, compared to December 31, 2020, primarily as a result of the following:

◦Commercial loans decreased by $873.4 million to $19.2 billion at June 30, 2021, compared to $20.0 billion at December 31, 2020. The decline was mainly due to a slowdown in mortgage refinance activity which resulted in a $724.1 million decline in mortgage warehouse loans.

STERLING BANCORP AND SUBSIDIARIES

◦Residential mortgage loans held in our loan portfolio declined by ~~$271.9~~$227.3 million to ~~$1.9~~$1.4 billion at June 30, ~~2020~~2021 compared to ~~$2.2~~$1.6 billion at December 31, ~~2019. This decline was~~2020 mainly due to repayments.

~~STERLING BANCORP AND SUBSIDIARIES~~

•~~Total investment securities declined~~Other assets decreased by ~~$529.7~~$60.2 million to ~~$4.5~~$1.0 billion at June 30, ~~2020,~~2021, compared to ~~$5.1~~$1.1 billion at December 31, ~~2019, mainly due to sales and calls of securities.~~

•~~Other assets increased by $217.8 million to $1.1 billion at June 30, 2020, compared to $840.9 million at December 31, 2019.~~2020. The components of other assets are as follows:


		June 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Low income housing tax credit investments	Low income housing tax credit investments	$	399,336	$	386,824	Low income housing tax credit investments	$	492,298	$	488,303
Right of use asset for operating leases	Right of use asset for operating leases	102,379		112,226		Right of use asset for operating leases	100,145		105,667
Fair value of swaps (see Note 9)		174,553		67,318
Fair value of swaps						Fair value of swaps	107,361		149,797
Cash on deposit as swap collateral net of settlement	Cash on deposit as swap collateral net of settlement	95,510		93,606		Cash on deposit as swap collateral net of settlement	62,513		82,478
Operating leases - equipment and vehicles leased to others	Operating leases - equipment and vehicles leased to others	61,497		72,291		Operating leases - equipment and vehicles leased to others	46,116		55,224
Other assets	Other assets	225,386		108,603		Other assets	194,770		181,934
		$	1,058,661	$	840,868		$	1,003,203	$	1,063,403

The table above includes the following items:

•We have invested in various limited partnerships that sponsor affordable housing projects using low income housing tax credits.

•The right of use assets for operating leases represents the asset recognized under the lease accounting standard which requires all operating leases to be recorded in the consolidated balance sheets, which are discussed in Note ~~15.~~14. “Commitments and Contingencies” in the notes to consolidated financial statements included elsewhere in this report.

•Fair value of swaps reflects the change in value since date of inception of our back-to-back commercial client loan swap program and positions, which are discussed in Note 9.8. “Derivatives” in the notes to consolidated financial statements included elsewhere in this report. The ~~increase~~decrease was mainly due to the ~~decline~~increase in interest rates in the ~~first half of 2020.~~six months ended June 30, 2021.

•Cash on deposit as swap collateral net of settlement represents amounts on deposit with third parties net of settlement to market for exchange traded and over the counter swaps.

•Operating leases - equipment and vehicles leased to others is mainly the remaining balance of leases we acquired in 2019.

•Other assets include ~~cash on deposit as collateral for swaps,~~ income taxes, prepaid insurance, prepaid property taxes, prepaid maintenance, accounts receivable and other miscellaneous assets. ~~The increase was mainly due to an increase in cash on deposit as collateral for swaps due to the decline in interest rates.~~

Total liabilities ~~increased $299.3~~decreased $808.6 million to ~~$26.4~~$24.4 billion at June 30, ~~2020,~~2021 as compared to ~~$26.1 billion at~~ December 31, ~~2019.~~2020. The decrease was mainly due to the following:

•~~Total deposits increased $1.2 billion~~FHLB borrowings decreased $382.0 million, fed funds purchased decreased $277.0 million, and Subordinated Notes - Bank declined $143.7 million compared to ~~$23.6 billion~~December 31, 2020. The decreases were funded from excess liquidity generated by increases in our deposit base and loan repayments.

•Other liabilities decreased $38.9 million to $689.8 million at June 30, ~~2020,~~2021, compared to ~~$22.4 billion~~$728.7 million at December 31, ~~2019. Our core deposits were $21.9 billion at June 30, 2020, which represented 92.8% of our total deposit balances.~~

◦~~Municipal deposits decreased $264.0 million to $1.7 billion at June 30, 2020, compared to $2.0 billion at December 31, 2019.~~2020. The decrease was mainly due to ~~seasonal factors as tax collections generally increase these balances at the end of the first and third quarters.~~

◦~~Brokered deposits declined $301.4 million to $1.6 billion at June 30, 2020, compared to $1.9 billion at December 31, 2019. The decrease was due to a change~~declines in ~~funding mix~~compensation payable, as a result of ~~other deposit inflows.~~

•~~PPPLF borrowings increased $568.4 million at June 30, 2020. These borrowings are collateralized by PPP loans.~~the payment in the first quarter of accrued bonuses and a decline in the value of swap liabilities due to changes in interest rates.

The ~~increases~~decreases above were partially offset by the following ~~decreases:~~increases:

•~~FHLB borrowings decreased $1.3 billion~~Total deposits increased $27.2 million to ~~$1.0~~$23.1 billion at June 30, ~~2020,~~2021, compared to ~~$2.2~~$23.1 billion at December 31, ~~2019,~~2020. Our core deposits were $22.6 billion at June 30, 2021, which ~~was mainly the result~~represented 97.7% of anour total deposit balances. The increase in ~~deposits~~the first six months of June 30, 2021 included increases primarily in interest bearing and ~~PPPLF borrowings.~~non-interest bearing transaction accounts, money market accounts and municipal deposits. Certificate of deposit accounts declined $563.1 million mainly due to higher costing balances that matured and were not renewed.

•~~Other liabilities declined $22.3~~Municipal deposits increased $195.8 million to ~~$671.1 million~~$1.8 billion at June 30, ~~2020,~~2021, compared to ~~$693.5 million~~$1.6 billion at December 31, ~~2019.~~2020. The ~~decrease~~increase was mainly due to ~~funding of accrued affordable housing commitments~~growth generated from our municipal and ~~payout of accruals for 2019 compensation.~~public sector banking teams.

Supplemental Reporting of Non-GAAP Financial Measures

The non-GAAP financial measures presented below are used by our management and our Board of Directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and to assess our performance compared to our annual budget and strategic plans. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors, analysts, regulators and others information that we use to manage and evaluate our performance each period. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. Accordingly, this financial information should be read in conjunction with our consolidated financial statements, and notes

7361

STERLING BANCORP AND SUBSIDIARIES

thereto for the quarter ended June 30, ~~2020~~2021 included elsewhere in this report, and the year ended December 31, ~~2019,~~2020, included in our Annual Report for the ~~2019~~year ended December 31, 2020 filed on Form 10-K.


	June 30,
	2021		2020
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue(1):
Net interest income	$	218,527	$	213,299
Non-interest income	30,214		26,090
Total net interest income and non-interest income	248,741		239,389
Non-interest expense	120,629		124,881
Pretax pre-provision net revenue	128,112		114,508

Adjustments:
Net (gain) on sale of securities	—		(485)


Loss on extinguishment of debt	1,243		9,723
Impairment related to financial centers and real estate consolidation strategy	475		—
Merger-related expense	2,481		—

Amortization of non-compete agreements and acquired customer list intangible assets	148		172
Adjusted pretax pre-provision net revenue including accretion income	132,459		123,918
Accretion income	(7,812)		(10,086)
Adjusted pretax pre-provision net revenue excluding accretion income	$	124,647	$	113,832
See legend beginning on page 64.

June 30,
2020 2019
The following table shows the reconciliation of pretax pre-provision net revenue to adjusted pretax pre-provision net revenue⁽¹⁾:
Net interest income $ 213,299 $ 231,839
Non-interest income 26,090 27,058
Total net interest income and non-interest income 239,389 258,897
Non-interest expense 124,881 126,940
Pretax pre-provision net revenue 114,508 131,957
Adjustments:
Net (gain) loss on sale of securities (485) 528
Loss on extinguishment of debt 9,723 —
Impairment related to financial centers and real estate consolidation strategy — 14,398
Amortization of non-compete agreements and acquired customer list intangible assets 172 200
Adjusted pretax pre-provision net revenue including accretion income 123,918 147,083
Accretion income (10,086) (23,745)
Adjusted pretax pre-provision net revenue excluding accretion income $ 113,832 $ 123,338

~~See legend beginning on page 79.~~

June 30,
2020 2019
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio ²:
Total assets $ 30,839,893 $ 30,237,545
Goodwill and other intangibles (1,785,446) (1,777,748)
Tangible assets 29,054,447 28,459,797
Stockholders’ equity 4,484,187 4,459,158
Preferred stock (137,142) (138,011)
Goodwill and other intangibles (1,785,446) (1,777,748)
Tangible common stockholders’ equity 2,561,599 2,543,399
Common stock outstanding at period end 194,458,805 205,187,243
Common stockholders’ equity as a % of total assets 14.10 % 14.29 %
Book value per common share $ 22.35 $ 21.06
Tangible common equity as a % of tangible assets 8.82 % 8.94 %
Tangible book value per common share $ 13.17 $ 12.40

~~See legend beginning on page 79.~~


	June 30,
	2021			2020
The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio 2:
Total assets	$	29,143,918		$	30,839,893
Goodwill and other intangibles	(1,769,494)			(1,785,446)
Tangible assets	27,374,424			29,054,447
Stockholders’ equity	4,722,856			4,484,187
Preferred stock	(136,224)			(137,142)
Goodwill and other intangibles	(1,769,494)			(1,785,446)
Tangible common stockholders’ equity	2,817,138			2,561,599
Common stock outstanding at period end	192,715,433			194,458,805
Common stockholders’ equity as a % of total assets	15.74		%	14.10		%
Book value per common share	$	23.80		$	22.35
Tangible common equity as a % of tangible assets	10.29		%	8.82		%
Tangible book value per common share	$	14.62		$	13.17
See legend beginning on page 64.

7462

STERLING BANCORP AND SUBSIDIARIES


		For the three months ended									For the six months ended										For the three months ended						For the six months ended
		June 30,									June 30,										June 30,						June 30,
		2020			2019			2020			2019				2021			2020			2021			2020
The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets ³:	The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets ³:																								The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets 3:
Average assets	Average assets	$	30,732,914		$	29,666,951		$	30,608,673		$	30,201,974		Average assets	$	29,390,977		$	30,732,914		$	29,486,261		$	30,608,673
Average goodwill and other intangibles	Average goodwill and other intangibles	(1,788,200)			(1,780,885)			(1,790,300)			(1,768,763)			Average goodwill and other intangibles	(1,771,971)			(1,788,200)			(1,773,848)			(1,790,300)
Average tangible assets	Average tangible assets	28,944,714			27,886,066			28,818,373			28,433,211			Average tangible assets	27,619,006			28,944,714			27,712,413			28,818,373
Net income available to common stockholders	Net income available to common stockholders	48,820			94,473			60,991			193,921			Net income available to common stockholders	96,380			48,820			193,567			60,991
Net income, if annualized	Net income, if annualized	196,353			378,930			122,317			391,056			Net income, if annualized	386,579			196,353			390,342			122,317
Reported return on average tangible assets	Reported return on average tangible assets	0.68		%	1.36		%	0.42		%	1.38		%	Reported return on average tangible assets	1.40		%	0.68		%	1.41		%	0.42		%
Adjusted net income (non-GAAP)	Adjusted net income (non-GAAP)	$	56,926		$	105,124		$	53,733		$	212,408		Adjusted net income (non-GAAP)	$	100,444		$	56,926		$	196,836		$	53,733
Annualized adjusted net income	Annualized adjusted net income	228,955			421,651			107,761			428,337			Annualized adjusted net income	402,880			228,955			396,934			107,761
Adjusted return on average tangible assets (non-GAAP)	Adjusted return on average tangible assets (non-GAAP)	0.79		%	1.51		%	0.38		%	1.51		%	Adjusted return on average tangible assets (non-GAAP)	1.46		%	0.79		%	1.43		%	0.38		%
See legend beginning on page 76.
See legend beginning on page 64.														See legend beginning on page 64.

For the three months ended For the six months ended
June 30, June 30,
2020 2019 2020 2019
The following table shows the reconciliation of reported net income and reported EPS (GAAP) to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted EPS (non-GAAP)⁴:
Income before income tax expense $ 57,902 $ 120,457 $ 64,007 $ 250,368
Income tax (benefit) expense 7,110 23,997 (932) 52,471
Net income (GAAP) 50,792 96,460 64,939 197,897
Adjustments:
Net (gain) loss on sale of securities (485) 528 (8,896) 13,712
Impairment related to financial centers and real estate consolidation strategy — 14,398 — 14,398
Net (gain) on sale of residential mortgage loans — — — (8,313)
Charge for asset write-downs, retention and severance — — — 3,344
Net loss (gain) on extinguishment of borrowings 9,723 — 10,467 (46)
Amortization of non-compete agreements and acquired customer lists 172 200 343 441
Total pre-tax adjustments 9,410 15,126 1,914 23,536
Adjusted pre-tax income 67,312 135,583 65,921 273,904
Adjusted income tax expense 8,414 28,472 8,240 57,520
Adjusted net income (non-GAAP) 58,898 107,111 57,681 216,384
Preferred stock dividend 1,972 1,987 3,948 3,976
Adjusted net income available to common stockholders (non-GAAP) $ 56,926 $ 105,124 $ 53,733 $ 212,408
Weighted average diluted shares 193,604,431 207,376,239 195,168,557 210,419,425
Diluted EPS as reported (GAAP) $ 0.25 $ 0.46 $ 0.31 $ 0.92
Adjusted diluted EPS (non-GAAP) 0.29 0.51 0.28 1.01
See legend beginning on page 76.


	For the three months ended				For the six months ended
	June 30,				June 30,
	2021		2020		2021		2020
The following table shows the reconciliation of reported net income and reported EPS (GAAP) to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted EPS (non-GAAP)4:
Income before income tax expense	$	122,862	$	57,902	$	244,967	$	64,007
Income tax expense (benefit)	24,523		7,110		47,478		(932)
Net income (GAAP)	98,339		50,792		197,489		64,939
Adjustments:
Net (gain) on sale of securities	—		(485)		(706)		(8,896)


Impairment related to financial centers and real estate consolidation strategy	475		—		1,108		—


Net loss on extinguishment of borrowings	1,243		9,723		1,243		10,467
Merger-related expense	2,481		—		2,481		—
Amortization of non-compete agreements and acquired customer lists	148		172		296		343
Total pre-tax adjustments	4,347		9,410		4,422		1,914
Adjusted pre-tax income	127,209		67,312		249,389		65,921
Adjusted income tax expense	24,806		8,414		48,631		8,240
Adjusted net income (non-GAAP)	102,403		58,898		200,758		57,681
Preferred stock dividend	1,959		1,972		3,922		3,948
Adjusted net income available to common stockholders (non-GAAP)	$	100,444	$	56,926	$	196,836	$	53,733

Weighted average diluted shares	192,292,989		193,604,431		192,456,817		195,168,557
Diluted EPS as reported (GAAP)	$	0.50	$	0.25	$	1.01	$	0.31
Adjusted diluted EPS (non-GAAP)	0.52		0.29		1.02		0.28
See legend beginning on page 64.

7563

STERLING BANCORP AND SUBSIDIARIES


		For the three months ended									For the six months ended										For the three months ended						For the six months ended
		June 30,									June 30,										June 30,						June 30,
		2020			2019			2020			2019				2021			2020			2021			2020
The following table shows the reconciliation of reported return on average tangible common stockholders’ equity and adjusted return on average tangible common stockholders’ equity ⁵:	The following table shows the reconciliation of reported return on average tangible common stockholders’ equity and adjusted return on average tangible common stockholders’ equity ⁵:																								The following table shows the reconciliation of reported return on average tangible common stockholders’ equity and adjusted return on average tangible common stockholders’ equity 5:
Average stockholders’ equity	Average stockholders’ equity	$	4,464,403		$	4,423,910		$	4,485,470		$	4,419,703		Average stockholders’ equity	$	4,670,718		$	4,464,403		$	4,643,838		$	4,485,470
Average preferred stock	Average preferred stock	(137,361)			(138,142)			(137,470)			(138,245)			Average preferred stock	(136,455)			(137,361)			(136,570)			(137,470)
Average goodwill and other intangibles	Average goodwill and other intangibles	(1,788,200)			(1,780,885)			(1,790,300)			(1,768,763)			Average goodwill and other intangibles	(1,771,971)			(1,788,200)			(1,773,848)			(1,790,300)
Average tangible common stockholders’ equity	Average tangible common stockholders’ equity	2,538,842			2,504,883			2,557,700			2,512,695			Average tangible common stockholders’ equity	2,762,292			2,538,842			2,733,420			2,557,700
Net income available to common stockholders	Net income available to common stockholders	48,820			94,473			60,991			193,921			Net income available to common stockholders	96,380			48,820			193,567			60,991
Net income, if annualized	Net income, if annualized	196,353			378,930			122,317			391,056			Net income, if annualized	386,579			196,353			390,342			122,317
Reported return on average tangible common stockholders’ equity	Reported return on average tangible common stockholders’ equity	7.73		%	15.13		%	4.78		%	15.56		%	Reported return on average tangible common stockholders’ equity	13.99		%	7.73		%	14.28		%	4.78		%
Adjusted net income (non-GAAP)	Adjusted net income (non-GAAP)	$	56,926		$	105,124		$	53,733		$	212,408		Adjusted net income (non-GAAP)	$	100,444		$	56,926		$	196,836		$	53,733
Annualized adjusted net income	Annualized adjusted net income	228,955			421,651			107,761			428,337			Annualized adjusted net income	402,880			228,955			396,934			107,761
Adjusted return on average tangible common stockholders’ equity (non-GAAP)	Adjusted return on average tangible common stockholders’ equity (non-GAAP)	9.02		%	16.83		%	4.21		%	17.05		%	Adjusted return on average tangible common stockholders’ equity (non-GAAP)	14.58		%	9.02		%	14.52		%	4.21		%
See legend beginning on page 76.
See legend beginning below														See legend beginning below


		For the three months ended									For the six months ended										For the three months ended						For the six months ended
		June 30,									June 30,										June 30,						June 30,
		2020			2019			2020			2019				2021			2020			2021			2020
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio⁶:	The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio⁶:																								The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio6:
Net interest income	Net interest income	$	213,299		$	231,839		$	425,071		$	467,345		Net interest income	$	218,527		$	213,299		$	436,441		$	425,071
Non-interest income	Non-interest income	26,090			27,058			73,416			46,655			Non-interest income	30,214			26,090			62,570			73,416
Total revenue	Total revenue	239,389			258,897			498,487			514,000			Total revenue	248,741			239,389			499,011			498,487
Tax equivalent adjustment on securities	Tax equivalent adjustment on securities	3,411			3,834			6,865			7,781			Tax equivalent adjustment on securities	3,115			3,411			6,235			6,865
Loss on termination of pension plan		—			—			—			—

Net (gain) loss on sale of securities		(485)			528			(8,896)			13,712
Net (gain) on sale of residential mortgage loans		—			—			—			(8,313)

Net loss (gain) on sale of securities														Net loss (gain) on sale of securities	—			(485)			(706)			(8,896)

Depreciation of operating leases	Depreciation of operating leases	(3,136)			—			(6,628)			—			Depreciation of operating leases	(2,917)			(3,136)			(6,042)			(6,628)
Adjusted total revenue (non-GAAP)	Adjusted total revenue (non-GAAP)	239,179			263,259			489,828			527,180			Adjusted total revenue (non-GAAP)	248,939			239,179			498,498			489,828
Non-interest expense	Non-interest expense	124,881			126,940			239,594			241,932			Non-interest expense	120,629			124,881			238,794			239,594
Impairment related to financial centers and real estate consolidation strategy	Impairment related to financial centers and real estate consolidation strategy	—			(14,398)			—			(14,398)			Impairment related to financial centers and real estate consolidation strategy	(475)			—			(1,108)			—
Charge for asset write-downs, systems integration, retention and severance		—			—			—			(3,344)
Net (loss) gain on extinguishment of borrowings		(9,723)			—			(10,467)			46

Net loss on extinguishment of borrowings														Net loss on extinguishment of borrowings	(1,243)			(9,723)			(1,243)			(10,467)
Merger-related expense														Merger-related expense	(2,481)			—			(2,481)			—
Depreciation of operating leases	Depreciation of operating leases	(3,136)			—			(6,628)			—			Depreciation of operating leases	(2,917)			(3,136)			(6,042)			(6,628)
Amortization of intangible assets	Amortization of intangible assets	(4,200)			(4,785)			(8,400)			(9,611)			Amortization of intangible assets	(3,776)			(4,200)			(7,552)			(8,400)
Adjusted non-interest expense (non-GAAP)	Adjusted non-interest expense (non-GAAP)	$	107,822		$	107,757		$	214,099		$	214,625		Adjusted non-interest expense (non-GAAP)	$	109,737		$	107,822		$	220,368		$	214,099
Reported operating efficiency ratio (non-GAAP)	Reported operating efficiency ratio (non-GAAP)	52.2		%	49.0		%	48.1		%	47.1		%	Reported operating efficiency ratio (non-GAAP)	48.5		%	52.2		%	47.9		%	48.1		%
Adjusted operating efficiency ratio (non-GAAP)	Adjusted operating efficiency ratio (non-GAAP)	45.1			40.9			43.7			40.7			Adjusted operating efficiency ratio (non-GAAP)	44.1			45.1			44.2			43.7
_______________	_______________													_______________
See legend beginning below.	See legend beginning below.													See legend beginning below.

¹ ~~Pretax pre-provision net revenue represents~~PPNR is a non-GAAP financial measure calculated by summing our GAAP net interest income plus GAAP non-interest income ~~less operating expenses before tax. With~~minus our GAAP non-interest expense and eliminating provision for credit losses and income taxes. We believe the ~~adoption~~use of ~~CECL and the impact of the COVID-19 pandemic, we are providing this~~PPNR provides useful information soto readers ~~may make comparison~~ of our ~~results~~financial statements because it enables an assessment of our ability to ~~prior periods.~~generate earnings to cover losses through a credit cycle. Adjusted PPNR includes the adjustments we make for adjusted earnings and excludes accretion income. We believe adjusted PPNR supplements our PPNR calculation. We use this calculation to assess our performance in the current operating environment.

7664

STERLING BANCORP AND SUBSIDIARIES

²Common stockholders’ equity as a percentage of total assets, book value per common share, tangible common equity as a percentage of tangible assets and tangible book value per common share are non-GAAP measures that provide information to help assess our capital position and financial strength. We believe tangible book value measures improve comparability to other banking organizations that have not engaged in acquisitions that have resulted in the accumulation of goodwill and other intangible assets.

³Reported return on average tangible assets and adjusted return on average tangible assets are non-GAAP measures that provide information to help assess our profitability.

⁴ Adjusted net income available to common stockholders and adjusted EPS are non-GAAP measures that present a summary of our earnings, which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our recurring profitability. For the purpose of calculating adjusted net income available for common stockholders and adjusted EPS, income tax expense is calculated using the estimated effective income tax rate for the full year in effect for the particular period end, as we believe this is a more accurate presentation of run rate income tax expense and earnings.

⁵ Reported return on average tangible common stockholders’ equity and the adjusted return on average tangible common stockholders’ equity are non-GAAP measures that provide information to evaluate the use of our tangible common equity.

⁶ The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance.

Liquidity and Capital Resources

Capital. Stockholders’ equity was ~~$4.5~~$4.7 billion as of June 30, ~~2020, a decrease~~2021, an increase of ~~$45.9~~$132.3 million relative to December 31, ~~2019.~~2020. The ~~decrease~~increase was mainly due to ~~the repurchase~~net income of ~~4,900,759 common shares at a cost~~$197.5 million, stock-based compensation and stock option exercises of ~~$81.0~~$16.0 million, ~~the adoption of the CECL Standard, which reduced capital by $54.3 million and declared dividends of $27.4 million on common stock and $4.4 million on preferred stock. These decreases were~~ partially offset by ~~net income~~common stock repurchases of ~~$50.8~~$27.3 million, ~~an increase in accumulated~~common shares acquired from stock compensation plan activity of $6.6 million, common dividends of $26.9 million, preferred dividends of $4.4 million, and other comprehensive ~~gain~~loss of ~~$48.4~~$15.9 million, which was primarily due to ~~an increase~~a decline in the fair value of our AFS ~~portfolio,~~portfolio.

In the first quarter of 2021, we repurchased 1,235,372 common shares at a cost of $27.3 million and an ~~increase~~average price of ~~stock option exercises and stock-based compensation~~$22.12 per share. Pursuant to the Merger Agreement with Webster, we did not repurchase any common shares in the open market in the second quarter of ~~$515 thousand.~~2021.

We paid dividends of $0.07 per common share in each quarter of ~~2019~~2020 and the first two quarters of ~~2020. Most recently,~~2021. On July 21, 2021, our Board of Directors ~~declared~~approved a dividend of $0.07 per common share, ~~on July 22, 2020,~~ which is payable August ~~17, 2020~~16, 2021 to our holders as of ~~the~~ record ~~date~~ of August ~~3, 2020.~~2, 2021. We paid dividends of $16.25 per preferred share in each quarter of ~~2019~~2020 and the first two quarters of ~~2020.~~2021. In addition, on July 15, ~~2020,~~2021, we paid a dividend of $16.25 per preferred share.

~~Basel III Capital Rules.~~ The Basel III Capital Rules were fully phased in on January 1, 2019. The rules are discussed in Note 14. “Stockholders’ Equity - Regulatory Capital Requirements” in the notes to consolidated financial statements included elsewhere in this report.

Liquidity. As discussed in our ~~2019~~2020 Form 10-K, our liquidity position is continuously monitored and we make adjustments to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic activity, volatility in the financial markets, unexpected credit events or other significant occurrences. Contingencies have been expanded to include analysis of the impact to cash flows associated with outstanding forbearance agreements and other factors associated with the pandemic. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. As of June 30, ~~2020,~~2021, our management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, including the Basel III liquidity framework, which, if implemented, would have a material adverse effect on us.

At June 30, ~~2020,~~2021, the Bank had ~~$324.7~~$487.4 million in cash and cash equivalents on hand and unused borrowing capacity at the FHLB of ~~$5.9~~$6.0 billion. In addition, the Bank may purchase federal funds from other institutions and enter into additional repurchase agreements. The Bank had ~~$2.8~~$2.4 billion of unencumbered securities available to pledge as collateral as of June 30, ~~2020. On March 15, 2020, the FRB~~2021.

7765

STERLING BANCORP AND SUBSIDIARIES

reduced reserve requirements ratios to zero effective March 26, 2020, which eliminated our reserve requirement as of June 30, 2020. Prior to that time, we maintained deposits at the FRB of New York in compliance with our reserve requirements.

We are a bank holding company and do not conduct business operations. Our primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by the Bank. At June 30, ~~2020,~~2021, the Bank had capacity to pay approximately ~~$81.4~~$163.7 million of dividends to us under regulatory guidelines without prior regulatory approval.

We had cash on hand of ~~$84.8~~$132.3 million at June 30, ~~2020.~~2021. In the first six months of ~~2020,~~2021, we received dividends from the Bank of ~~$120.0~~$80.0 million and our primary uses of cash were ~~$81.0~~$27.3 million for common stock repurchases ~~$31.8~~and $31.3 million for ~~dividends and $173.5 million for repaying the Senior Notes.~~dividends.

~~Effective August 27, 2019 we renewed our~~We have a $35.0 million credit facility with a financial ~~institution. The use of proceeds are~~institution for general corporate purposes. The credit facility has no outstanding balance and requires us and the Bank to maintain certain ratios related to capital, non-performing assets to capital, reserves to non-performing loans and debt service coverage. We and the Bank were in compliance with all requirements at June 30, ~~2020. We expect to renew this~~2021. The facility ~~for another year during the third quarter of 2020.~~

expires on November 28, 2021.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Management believes that our most significant form of market risk is interest rate risk. The general objective of our interest rate risk management is to determine the appropriate level of risk given our business strategy, and then manage that risk in a manner that is consistent with our policy to limit the exposure of our net interest income to changes in market interest rates. The Bank’s Asset/Liability Management Committee (“ALCO”), which consists of certain members of senior management, evaluates the interest rate risk inherent in certain assets and liabilities, our operating environment, and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. A committee of our Board of Directors reviews ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios, as well as the intrinsic value of our deposits and borrowings.

Management actively evaluates interest rate risk in connection with our lending, investing, and deposit activities. Management emphasizes the origination of CRE loans and C&I loans. We also invest in shorter-term securities, which generally have lower yields compared to longer-term investments. Shortening the average maturity of our interest earning assets by increasing our investments in shorter-term loans and securities may help us to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. These strategies may adversely affect net interest income due to lower initial yields on these investments in comparison to longer-term, fixed-rate loans and investments.

Management monitors interest rate sensitivity primarily through the use of a model that simulates net interest income (“NII”) under varying interest rate assumptions. Management also evaluates this sensitivity using a model that estimates the change in our and the Bank’s economic value of equity (“EVE”) over a range of interest rate scenarios. EVE is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The model assumes estimated loan prepayment rates, reinvestment rates and deposit decay rates that management believes is reasonable, based on historical experience during prior interest rate changes.

STERLING BANCORP AND SUBSIDIARIES

Estimated Changes in EVE and NII. The table below sets forth, as of June 30, ~~2020,~~2021, the estimated changes in our (i) EVE that would result from the designated instantaneous changes in the forward rate curves; and (ii) NII that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied on as indicative of actual results.


Interest rates	Interest rates	Estimated		Estimated change in EVE						Estimated		Estimated change in NII						Interest rates	Estimated		Estimated change in EVE				Estimated		Estimated change in NII
(basis points)	(basis points)	EVE		Amount		Percent		NII		Amount		Percent		(basis points)	EVE		Amount		Percent		NII		Amount		Percent
		(Dollars in thousands)																							(Dollars in thousands)
+300	+300	$	4,291,331	$	645,843	17.7	%	$	1,069,074	$	173,526	19.4	%	+300	$	5,038,435	$	451,345	9.8	%	$	1,060,793	$	185,445	21.2	%
+200	+200	4,215,246		569,758		15.6		1,011,437		115,889		12.9		+200	4,999,332		412,242		9.0		1,000,516		125,168		14.3
+100	+100	3,997,167		351,679		9.6		953,093		57,545		6.4		+100	4,847,539		260,449		5.7		936,772		61,424		7.0
0	0	3,645,488		—		—		895,548		—		—		0	4,587,090		—		—		875,348		—		—
-100	-100	3,106,298		(539,190)		(14.8)		838,521		(57,027)		(6.4)		-100	4,072,521		(514,569)		(11.2)		810,863		(64,485)		(7.4)

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and NII require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The EVE and NII table presented above assumes that the composition of our interest-rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions management may undertake in response to changes in interest rates. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the re-pricing characteristics of specific assets and liabilities. Accordingly, although the EVE and NII table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes that market interest rates may have on our net interest income. Actual results will likely differ.

During the six months ended June 30, ~~2020,~~2021, the federal funds target rate ~~was lowered from 1.50 - 1.75% to~~remained in the range 0.00 - 0.25% ~~in an effort to mitigate the effects of COVID-19 on economic activity.~~. U.S. Treasury yields with two year maturities ~~decreased 142~~increased 12 basis points from ~~1.58%~~0.13% to ~~0.16%~~0.25% over the six months ended June 30, ~~2020,~~2021, while the yield on U.S. Treasury 10-year notes ~~decreased 126~~increased 52 basis points from ~~1.92%~~0.93% to ~~0.66%.~~1.45% over the same period. The greater ~~decrease~~increase in interest rates on ~~short-term~~longer-term maturities relative to the lesser ~~decrease~~increase in interest rates on ~~longer-terms~~shorter-terms maturities resulted in a steeper 2-10 year U.S. Treasury yield curve at June 30, ~~2020~~2021 compared to December 31, ~~2019.~~2020. At its June ~~2020~~2021 meeting, the Federal Open Markets Committee ~~(the “FOMC”)~~ stated that it ~~expects~~will be appropriate to maintain the current federal funds target rate until ~~it is confident that~~labor market conditions have reached levels consistent with the ~~economy has weathered recent events and is on-track to achieve its~~Committee’s assessment of maximum employment and ~~price goals. The FOMC further stated that in determining the timing adjustments~~inflation has risen to ~~the stance of monetary policy, the Committee will assess realized~~two percent and ~~expected economic conditions relative~~is on track to ~~its maximum employment objective and its symmetric~~moderately exceed 2 percent ~~inflation objective.~~for some time.

Item 4. Controls and Procedures

The Company’s management, including the principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in our reports filed with the SEC under the Securities Exchange Act of 1934, as amended, is: (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

The adoption of the CECL Standard did result in new policies and procedures regarding, and introduced new controls over, the review of economic forecasting projections obtained from Moody’s. However, the internal controls for CECL are substantially similar to the internal controls used under GAAP prior to adoption of the CECL Standard for the allowance for loan losses. As a result, we concluded thereThere were no changes in the Company’s internal controls over financial reporting during the three months ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

7967

Table of Contents

PART II

Item 1. Legal Proceedings

The “Litigation” section of Note ~~15.~~14. “Commitments and Contingencies” in the notes to consolidated financial statements included in Part I, Item 1 is incorporated herein by reference.

Item 1A. Risk Factors

For information regarding factors that could affect our business, results of operations, financial condition and liquidity, see the risk factors discussed under Part I, Item 1A of our ~~2019~~2020 Form 10-K.

The risk factors set forth in our ~~2019~~2020 Form 10-K are updated by adding the following risk ~~factor:~~factors:

Failure to complete our proposed merger with Webster could negatively impact our business, financial results and stock price.

If the merger is not completed for any reason, our ongoing business may be adversely affected, and, without realizing any of the benefits of having completed the merger, we will be subject to a number of risks, including the following:

•we may experience negative reactions from the financial markets, including negative impacts on our stock price;

•the market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed;

•we may experience negative reactions from our customers, vendors and colleagues;

•we will have incurred substantial expenses and will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, investment banking and advisory and printing fees;

•the Merger Agreement places certain restrictions on the conduct of our business prior to completion of the merger, such restrictions, the waiver of which is subject to the consent of Webster (not to be unreasonably withheld, conditioned or delayed), may adversely affect our ability to execute certain of our business strategies; and

•matters relating to the merger may require substantial commitments of time and resources by our management (including integration planning), which could otherwise have been devoted to other opportunities that may have been beneficial to us, as an independent company.

In addition to the above risks, if the Merger Agreement is terminated and our board of directors seeks another merger or business combination, the market price of our common stock could decline, which could make it more difficult to find a party willing to offer equivalent or more attractive consideration than the consideration Webster has agreed to provide. If the Merger Agreement is terminated under certain circumstances, we may be required to pay a termination fee of $185.0 million to Webster, which may adversely affect the price of our common stock. Any of the above risks could materially affect our business, financial results and stock price.

We face risks and uncertainties related to our proposed merger with Webster.

Uncertainty about the effect of the merger on colleagues and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers and others that deal with us to seek to change their existing business relationships with us. Colleagues retention may be particularly challenging during the pendency of the merger, as colleagues may experience uncertainty about their roles with the surviving corporation following the merger.

In addition, the Merger Agreement contains provisions that restrict our ability to, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to our board of directors’ exercise of its fiduciary duties, engage in any negotiations concerning, or provide any confidential information relating to, any alternative business combination proposals. These provisions, which include a $185.0 million termination fee payable under certain circumstances, might discourage a potential competing acquirer that might have an interest in engaging in a superior transaction from considering or proposing that acquisition, or might result in lower value received by our stockholders than would have otherwise been received.

The ~~COVID-19 pandemic has impacted our business,~~Company and Webster have operated and, until the ~~ultimate impact~~completion of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings among other things, will depend, in part, on our ~~business, financial position, results of operations and/or cash flows will depend on future developments, which are highly uncertain~~ and cannot be predicted, including, but not limited to, the scope and duration of the pandemic and the actions taken by governmental authorities, our clients and our business partners in response to the pandemic.

The global pandemic resulting from the outbreak of COVID-19 has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. Some of the risks we face from the pandemic include, but are not limited to: the health and availability of our colleagues, the financial condition of our clients and the demand for our products and services, falling interest rates, recognition of credit losses and increases in the allowance for credit losses, especially if businesses remain closed, unemployment continues to rise and clients and customers draw on their lines of credit or seek additional loans to help finance their businesses, and a significant deterioration of business conditions in our markets, particularly the New York Metro market and the New York Suburban market.

While we have not experienced a significant impact on the availability of our employees to date, given the markets we operate in, our colleagues are at risk of being exposed to COVID-19. While we have taken meaningful steps and precautions to ensure their health and well-being, COVID-19 could still impact our colleagues’Webster's ability to ~~work effectively~~successfully combine and ~~availability due to illness, quarantines, government actions, financial center closures or other reasons. In particular,~~integrate our ~~financial centers present an increased risk of exposure for our employees. If our employees are not able to work as effectively or~~and Webster’s businesses in a ~~substantial number of employees are unable to work due to COVID-19, our business would be adversely effected.~~

Our clients are subject to many of the factors described above. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage,manner that facilitates growth opportunities and ~~result in loss of revenue.~~realizes cost savings. It is possible that the ~~spread of COVID-19 may also cause delays~~integration process could result in the ~~willingness~~loss of key employees, the loss of customers, the disruption of either company’s or ~~ability of clients to perform, including, but not limited to, making timely payments to us,~~both companies’ ongoing business, inconsistencies in standards, controls, procedures and ~~other unpredictable events.~~

~~The pandemic has also influenced the recognition of credit losses in our loan portfolio~~policies, unexpected integration issues, higher than expected integration costs and increased our allowance for credit losses. During the six months ended June 30, 2020, approximately $150.0 million of the $193.2 million provision for credit losses - loans recorded was a result of changing our forecast and model assumptions due to COVID-19. In the second quarter of 2020, we entered into $1.7 billion of loan payment deferral agreements with borrowers. The pandemic may continue to have a material adverse effect on our loan portfolio, particularly as businesses remain closed and as more clients may need to draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize other-than-temporary impairments in future periods on the securities we hold, as well as reductions in other comprehensive income.

The New York Metro Market and the New York Suburban Market have been disproportionately impacted by COVID-19 relative to other areas. As such, the impact on COVID-19 on us and our clients may be greateran overall post-completion integration process that takes longer than ~~on similar banks or bank holding companies that do not have a similar geographic concentration.~~

~~The volatility in the global capital markets resulting from the pandemic and related business conditions may restrict our access to capital and/or increase our cost of capital.~~

originally

8068

Table of Contents

Toanticipated. If the ~~extent~~combined companies experience difficulties with the ~~COVID-19 pandemic~~integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected.

The Merger Agreement may be terminated in accordance with its terms and the merger may not be completed.

The Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: the approval of the merger by our and Webster’s stockholders; the receipt of authorization for listing on the NYSE of the shares of Webster common stock and preferred stock (or depositary shares in respect thereof) to be issued in the merger; the receipt of all required regulatory approvals; the effectiveness of the registration statement on Form S-4 for the shares of Webster common stock and preferred stock (or depositary shares in respect thereof) to be issued in the merger; the absence of any order, injunction or other legal restraint preventing the completion of the merger or making the merger illegal; subject to certain exceptions, the accuracy of representations and warranties under the Merger Agreement; our and Webster’s performance of our and their respective obligations under the Merger Agreement in all material respects; and each of our and Webster’s receipt of a tax opinion to the effect that the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. These conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and, accordingly, the merger may be delayed or may not be completed.

We and Webster may elect to terminate the Merger Agreement under certain circumstances. Among other situations, if the merger is not completed by April 18, 2022, either we or Webster may choose not to proceed with the merger (unless the failure of the closing to occur by such date was due to the failure of the party seeking to terminate the Merger Agreement to perform or observe the obligations, covenants and agreements of such party set forth in the Merger Agreement). We and Webster can also mutually decide to terminate the Merger Agreement at any time. If the Merger Agreement is terminated, under certain limited circumstances, we may be required to pay a termination fee of $185.0 million to Webster.

Our ability to complete the merger is subject to the receipt of approval from various regulatory agencies, which may impose conditions that could adversely ~~affects our~~affect us or cause the merger to be abandoned.

Before the transactions contemplated in the Merger Agreement can be completed, the Company and Webster must obtain various approvals, including approval of the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency. The terms and conditions of the approvals that are granted may impose conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business ~~financial position, results~~or require changes to the terms of ~~operations and/~~the transactions contemplated by the Merger Agreement. Although the Company and Webster do not currently expect that any such conditions or ~~cash flows, it may also~~changes would be imposed, there can be no assurance that the regulators will not impose any such conditions, obligations or restrictions, and that such conditions, limitations, obligations or restrictions will not have the effect of ~~heightening many~~delaying or preventing completion of any of the ~~other risks we face, including~~transactions contemplated by the ~~risks described in~~Merger Agreement, imposing additional material costs on or materially limiting the ~~section entitled “Risk Factors” in our 2019 Form 10-K and~~revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe, any ~~subsequent Quarterly Report~~of which might have an adverse effect on ~~Form 10-Q.~~the combined company following the merger.

~~We continue to work with~~Because the market price of Webster’s common stock may fluctuate, our ~~stakeholders (including colleagues, clients, and business partners) to assess, address and mitigate the impact of this global pandemic. However, we~~stockholders cannot ~~predict the length and impact~~be certain of the ~~COVID-19 pandemic~~precise value of the merger consideration they may receive in the merger.

At the time the merger is completed, each issued and outstanding share of our common stock will be converted into the right to receive 0.4630 of a share of Webster’s common stock.

There will be a time lapse between each of the date of the proxy statement/prospectus for the stockholder meeting to adopt the Merger Agreement, the date on which our stockholders vote to approve the Merger Agreement, and the date on which our stockholders entitled to receive shares of Webster’s common stock actually receive such shares. The market value of Webster’s common stock may fluctuate during these periods as a result of a variety of factors, including general market and economic conditions, changes in Webster’s businesses, operations and prospects, and regulatory considerations. Many of these factors are outside of our and Webster’s control. Consequently, at ~~this time.~~the time that our stockholders must decide whether to approve the Merger Agreement, they will not know the actual market value of the shares of Webster’s common stock that they will receive when the merger is completed. The actual value of the shares of Webster common stock received by our stockholders will depend on the market value of shares of Webster common stock at the time the Merger is completed. This market value may be less or more than the value used to determine the exchange ratio stated in the Merger Agreement.

Table of Contents

Stockholder litigation could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations.

In connection with the merger, lawsuits may be filed against us, Webster, or the directors and officers of either company in connection with the merger. Litigation filed against us, our board of directors or Webster and its board of directors could prevent or delay the completion of the merger or result in the payment of damages following completion of the merger. The defense or settlement of any lawsuit or claim that remains unresolved at the effective time of the merger may adversely affect the combined company's business, financial condition, results of operations, cash flows and market price.

The risks described above and in our ~~2019~~2020 Form 10-K are not the only risks that we encounter. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, results of operations, financial condition and/or liquidity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

We did not ~~purchase~~repurchase any ~~of our~~ common ~~stock during~~shares in the open market in the second quarter of ~~2020.~~2021. We have ~~6,671,776~~13,511,810 shares remaining for repurchase under our Board approved stock repurchase ~~plan:~~

Total Number
of shares
(or units)
purchased

Average
price paid
per share
(or unit)

~~Total number of~~

~~shares (or units)~~

~~purchased as part~~

~~of publicly~~

~~announced plans~~

~~or programs~~ ⁽¹⁾

~~Maximum number~~

~~(or approximate~~

~~dollar value) of~~

~~shares (or units)~~

~~that may yet be~~

~~purchased under the~~

~~plans or programs~~ ⁽¹⁾

~~Period (2020)~~

~~April 1 — April 30~~

—

~~May 1— May 30~~

—

~~June 1 — June 30~~

—

~~Total~~

—

~~6,671,776~~

⁽¹⁾Repurchases may be made at management’s discretion through open market purchases and block trades in accordance with SEC and regulatory requirements. Any shares repurchased will be held as Treasury stock and made available for general corporate purposes.plan; however, under the terms of the Merger Agreement, we have suspended further repurchases.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Mine Safety Disclosure

Not Applicable.

Item 5. Other Information

Not Applicable.

8170

Table of Contents

Item 6. Exhibits


Exhibit Number						Description
2.1						Agreement and Plan of Merger, dated as of April 18, 2021, by and between the Company and Webster Financial Corporation (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed April 22, 2021).
3.1						Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed November 2, 2018).
3.2						Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 24, 2017 (File No. 001-35385)).
4.1						Form of Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on November 1, 2013 (File No. 001-35385)).
4.2						~~Form of Corporate Governance Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on August 7, 2012 (File No. 001-35385)).~~
~~4.3~~						Deposit Agreement and specimen receipt attached as Exhibit A thereto, dated as of March 19, 2013 among Astoria Financial Corporation, Computershare Shareowner Services, LLC, as Depositary, and the holders of the depositary receipts (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-4 filed on April 5, 2017 (File No. 333-217153)).
~~4.4~~4.3						First Amendment to the Deposit Agreement, dated as of October 2, 2017, among Sterling Bancorp, Computershare Shareowner Services, LLC, as Depositary, and the holders of the depositary receipts (incorporated by reference to Exhibit 4.4 of the Company’s Quarterly Report on Form 10-Q filed on November 3, 2017 (File No. 001-35385)).
~~4.5~~4.4						Certificate of Designations of 6.50% Non-Cumulative, Perpetual Preferred Stock, Series A of Sterling Bancorp (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 2, 2017 (File No. 001-35385)).
~~4.6~~4.5						Form of Certificate of 6.5% Non-Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 4.2 of the Company’s Form 8-A12B filed on September 28, 2017 (File No. 001-35385)).
31.1						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.0						Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						XBRL Taxonomy Extension Calculation Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

The Company agrees to furnish to the SEC, upon request, any instrument with respect to long-term debt that the Company has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

8271

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sterling Bancorp

Date:

July 30, ~~2020~~2021

By:

/s/ Jack Kopnisky

Jack Kopnisky

President, Chief Executive Officer and Director

(Principal Executive Officer)

Date:

July 30, ~~2020~~2021

By:

/s/ ~~Luis Massiani~~Beatrice Ordonez

~~Luis Massiani~~Beatrice Ordonez

~~Senior~~ Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

8372


	Change in consolidated balance sheet		Tax effect		Change to retained earnings from adoption of new accounting principle
Allowance for credit losses (“ACL”) - loans	$	68,088	$	18,820	$	49,268
ACL - loans - (adjustment related to purchase credit impaired loan mark)¹	22,496		—		—
Total ACL - loans	90,584		18,820		49,268
ACL - HTM securities	796		220		576
ACL - off balance sheet credit exposure (recorded in other liabilities)	6,095		1,685		4,410
Total impact of CECL adoption	$	97,475	$	20,725	$	54,254


	As reported under CECL		Prior to CECL Standard adoption		Impact of CECL adoption
Assets:
ACL - HTM securities:



Corporate and other	$	108	$	—	$	108
State and municipal	688		—		688

Total ACL - HTM securities	796		—		796

ACL - loans	$	196,822	$	106,238	$	90,584

Liabilities:
ACL - off-balance sheet credit exposures (recorded in other liabilities)	$	6,749	$	654	$	6,095


	At December 31, 2019								December 31, 2019
	Originated		Acquired		Total		ALLL
Commercial and industrial	$	6,982,226	$	1,250,493	$	8,232,719	$	52,548
Commercial mortgage⁽¹⁾	7,788,749		2,974,100		10,762,849		44,137
Residential mortgage	541,681		1,668,431		2,210,112		7,598
Consumer	121,310		113,222		234,532		1,955
Total	$	15,433,966	$	6,006,246	$	21,440,212	$	106,238


	ALLL as of December 31, 2019		Adjustments recorded as of January 1, 2020								ACL as of January 1, 2020
					CECL Day 1			PCD gross-up
Commercial and industrial	$	52,548	$	44,675		$	6,624		$	103,847
Commercial mortgage	44,137		21,384			1,440			66,961
Residential mortgage	7,598		942			13,162			21,702
Consumer	1,955		1,087			1,270			4,312
Total	$	106,238	$	68,088		$	22,496		$	196,822


	Interest reversed
	For the three months ended				For the six months ended
	June 30, 2020		June 30, 2020
Traditional C&I	$	42	$	49
Asset-based lending	—		67





CRE	142		288
Multi-family	84		111
ADC	—		297
Residential mortgage	99		179
Consumer	—		7
Total interest reversed	$	367	$	998


	Loans evaluated by segment														Allowance evaluated by segment
	Individually evaluated for impairment		Collectively evaluated for impairment		PCI loans		Total loans		Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance for loan losses
Traditional C&I	$	29,838	$	2,320,256	$	4,937	$	2,355,031	$	—	$	15,951	$	15,951
Asset-based lending	4,684		1,064,275		13,659		1,082,618		—		14,272		14,272
Payroll finance	9,396		217,470		—		226,866		—		2,064		2,064
Warehouse lending	—		1,330,884		—		1,330,884		—		917		917
Factored receivables	—		223,638		—		223,638		—		654		654
Equipment financing	4,971		1,794,036		1,557		1,800,564		—		16,723		16,723
Public sector finance	—		1,213,118		—		1,213,118		—		1,967		1,967
CRE	39,882		5,358,023		20,743		5,418,648		—		27,965		27,965
Multi-family	11,159		4,860,246		5,465		4,876,870		—		11,440		11,440
ADC	—		467,331		—		467,331		—		4,732		4,732
Residential mortgage	6,364		2,140,650		63,098		2,210,112		—		7,598		7,598
Consumer	2,731		224,986		6,815		234,532		—		1,955		1,955
Total portfolio loans	$	109,025	$	21,214,913	$	116,274	$	21,440,212	$	—	$	106,238	$	106,238


	December 31, 2019
	Unpaid principal balance		Recorded investment
Loans with no related allowance recorded:
Traditional C&I	$	39,595	$	29,838
Asset-based lending	16,181		4,684
Payroll finance	9,396		9,396


Equipment financing	6,409		4,971
CRE	44,526		39,882
Multi-family	11,491		11,159

Residential mortgage	7,728		6,364
Consumer	2,928		2,731
Total	$	138,254	$	109,025


	June 30, 2020											June 30, 2019
		Recorded investment										Recorded investment
	Number			Pre- modification			Post- modification		Number			Pre- modification		Post- modification
Traditional C&I	—	$	—		$	—		1		$	5,026	$	5,026
Asset-based lending	2	10,553			9,822			—		—		—



Equipment financing	—	—			—			5		2,806		2,806



Residential mortgage	—	—			—			3		1,274		1,274

Total TDRs	2	$	10,553		$	9,822		9		$	9,106	$	9,106


Substandard	—		29,091		20,729		16,044		6,004		5,259		—		—		77,127
Total equipment financing	281,836		684,942		357,250		192,919		111,786		71,072		—		—		1,699,805
Public Sector Finance
Pass	209,698		415,841		216,708		293,257		190,463		73,248		—		—		1,399,215
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total public sector finance	209,698		415,841		216,708		293,257		190,463		73,248		—		—		1,399,215
CRE
Pass	678,622		1,418,239		1,030,051		584,824		624,060		1,340,181		—		—		5,675,977
Special mention	12,511		1,978		235		6,233		—		33,093		—		—		54,050
Substandard	—		12,795		119		2,541		5,352		67,124		—		—		87,931
Total CRE	691,133		1,433,012		1,030,405		593,598		629,412		1,440,398		—		—		5,817,958
Multi-family
Pass	209,599		748,377		443,927		668,214		684,963		1,712,543		76,060		—		4,543,683
Special mention	—		—		—		—		—		17,576		—		—		17,576
Substandard	—		—		—		—		1,392		22,288		—		—		23,680
Total multi-family	209,599		748,377		443,927		668,214		686,355		1,752,407		76,060		—		4,584,939
ADC
Pass	97,404		201,566		124,599		68,402		27,054		21,244		—		—		540,269
Special mention	—		—		—		1,855		—		—		—		—		1,855
Substandard	—		—		—		30,000		—		434		—		—		30,434
Total ADC	97,404		201,566		124,599		100,257		27,054		21,678		—		—		572,558
Residential
Pass	2,749		13,183		55,398		54,196		134,572		1,616,255		—		—		1,876,353
Special mention	—		—		—		—		—		993		—		—		993
Substandard	—		—		—		—		401		60,465		—		—		60,866
Total residential	2,749		13,183		55,398		54,196		134,973		1,677,713		—		—		1,938,212
Consumer
Pass	61		457		586		491		206		6,132		124,058		71,844		203,835
Special mention	—		—		—		—		—		—		42		—		42
Substandard	—		—		—		—		—		404		3,138		7,437		10,979
Total consumer	61		457		586		491		206		6,536		127,238		79,281		214,856
Total Loans	$	2,380,817	$	3,947,445	$	2,802,035	$	2,237,463	$	2,472,184	$	5,733,104	$	2,642,938	$	79,281	$	22,295,267


	Amortization expense
Remainder of 2020	$	8,400
2021	15,104
2022	13,703
2023	12,322
2024	10,448
2025	8,722
Thereafter	12,765
Total	$	81,464


Remainder of 2020	$	9,541
2021	17,967
2022	16,195
2023	14,693
2024	12,894
2025	10,261
2026 and thereafter	45,237
Total lease payments	126,788
Interest	17,114
Present value of lease liabilities	$	109,674


	Net unrealized holding gain (loss) on available for sale securities		Net unrealized holding (loss) gain on securities transferred to held to maturity		Net unrealized holding gain on retirement plans		Total
For the three months ended June 30, 2020
Balance beginning of the period	$	67,249	$	(468)	$	840	$	67,621

Other comprehensive income before reclassification	21,242		—		—		21,242

Amounts reclassified from AOCI	(351)		43		55		(253)
Total other comprehensive income	20,891		43		55		20,989
Balance at end of period	$	88,140	$	(425)	$	895	$	88,610
For the three months ended June 30, 2019
Balance beginning of the period	$	(19,577)	$	(797)	$	13,764	$	(6,610)

Other comprehensive income before reclassification	46,438		—		—		46,438

Amounts reclassified from AOCI	382		88		48		518
Total other comprehensive income	46,820		88		48		46,956
Balance at end of period	$	27,243	$	(709)	$	13,812	$	40,346
Location in consolidated income statements where reclassification from accumulated other comprehensive loss is included	Net gain (loss) on sale of securities		Interest income on securities		Other non-interest expense